Provide journal entries pertaining to this lease for Tartufo Corp. for the 20X5 year. Tartufo Corp. uses straight-line depreciation for similar assets, with a half-year of deprecation recorded in the year of acquisition.
Q: Meester Corporation has an activity-based costing system with three activity cost pools--Machining,…
A: Overhead cost is the amount of cost incurred on the making of the goods. It is shown in the cost…
Q: Consider how Star Valley, a popular ski resort, could use capital budgeting to decide whether the $9…
A: Capital budgeting is the process a business undertakes to evaluate potential major projects or…
Q: PT Barnum Company uses the periodic inventory system and has the following data from its December…
A: Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: JPL, Incorporated has provided its sales and expense data for the most recent period. The Controller…
A: Variable costs are costs that varies with the change in the level of output. Fixed costs are costs…
Q: Score:4/20 E9.16 (LO 4) Nelson Company, organized in 2020, has the following transactions related to…
A: Journal Entry :— It is an act of recording transaction in books of account when transaction…
Q: (b) State the basic accounting entity and briefly explain the implications of the same. (c) Outline…
A: An accounting entity is an organization or individual for which accounting records are kept. In…
Q: Mabel, Loretta, and Margaret are equal partners in a local restaurant. The restaurant reports the…
A: The 1040 tax form reports your annual income and determines how much of that income is taxable. This…
Q: Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama.…
A: ROI = Margin*Turnover Residual income = Net operating income - (Average operating assets*Minimum…
Q: Question 6 of 9 Current Attempt in Progress Crane Inc. incurred a net operating loss of $455,000 in…
A: Deferred tax asset = $455,000×30% = $136,500
Q: In its 2016 income statement, Hendrickson Company reported cost of goods sold of $340,000. Later,…
A: EFFECT DUE TO UNDERSTATED OF INVENTORY If Beginning Inventory Understated - then the Gross Profit…
Q: Please explain well step by step because i have to do it in excel This production data was recorded…
A: The high-low method is a simple technique that is used to separate mixed costs into their fixed and…
Q: For each item below, indicate whether it involves: 1. 2. 3. Use the appropriate number to indicate…
A: A deferred tax asset is a business tax credit for future taxes, and a deferred tax liability means…
Q: After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's…
A: ABC seems to be a costing approach that identifies activities in an organization and allocates the…
Q: Problem 6-53 (LO 6-5) Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a…
A: The taxpayer pays taxes on the taxable income. The taxpayer is also allowed to take a deduction of…
Q: Pointer Company buys a piece of property in north Toronto th
A: As per standard accounting practices when we purchase an asset , all…
Q: J has net income or les of $9: and average total assets of $4
A: margin = net income / sales*100 margin= $81,700/$950,000*100 =8.6%
Q: Preble Company manufactures one product. Its variable manufacturing overhead is applied to…
A: The variance is the difference between the actual data and standard cost of production. The direct…
Q: The following cost and inventory data are taken from the accounting records of Mason Company for the…
A: Cost of goods sold is (COGS) is the sum of all direct costs associated with making a product. It…
Q: Inglis City had a beginning cash and cash equivalents balance in its internal service fund of…
A: A case flow statement is a graphical representation of the steps and decisions involved in a…
Q: Problem 8-6 Multiple choice (AICPA Adapted) 1. In analyzing an entity's financial statements, which…
A: Problem 8-6 : 1.) To assess an entity's liquidity and financial flexibility, Balance sheet or…
Q: Cost of Goods Manufactured, using Variable Costing and Absorption Costing On March 31, the end of…
A: Note : Cost accounting is defined as the branch of accounting used by manufacturing entities in…
Q: Which of the following building will be entitled to a Division 43 deduction at 4% in the current…
A: A deduction is given to the business over the properties and the rate of deduction is also given as…
Q: Which of the following is an account used in applying the Sales Warranty Approach, but not the…
A: The Sales Warranty Approach is an accounting method used to account for warranties that a company…
Q: A sole trader has the following items in the book accounts: Sales R60 000; Cost of Sales R50 000;…
A: To calculate the net profit/loss for the sole trader, we need to use the following formula: Net…
Q: The 123 Accounting Company sells accounting videos. The following information has been extracted…
A: Weighted-average method: Weighted-average method is a method of inventory valuation. In this method,…
Q: At the end of the first quarter of 202X, you are asked to determine the FUTA tax liability for…
A: Payroll taxes are defined as the amounts collected by the government or revenue collection authority…
Q: is a single taxpayer. his
A: Taxable income refers to the sum value of money earned by a taxpayer that is subject to a compulsory…
Q: Thank you. This was the calculation I obtained when working the problem for basic EPS. Can you…
A: Diluted EPS used to measure the performance or profitability of the firm it includes convertible…
Q: Financial performance measures are essential tools used by managers to evaluate the financial health…
A: Note : A good performance measure should have following qualities - Provide a reasonable incentive…
Q: Journalize the adjusting entries. 1. To record rent expense. (Three months of rent was prepaid…
A: Adjusting entries are accounting entries that are made at the end of an accounting period to update…
Q: Mower-Blower Sales Co. started business on January 20, 2019. Products sold were snow blowers and…
A: Lets understand the basics. There are various method through which ending inventory and cost of…
Q: Upon your review of Shalom Company's standard cost card. You found the following information:…
A: Direct labor efficiency variance :— It is the difference between standard direct labour cost for…
Q: XY Company provided you the following data: Average operating assets 120,000…
A: The operating income is the excess of revenue over the expenses incurred. The residual income is the…
Q: Inventory Valuation under Absorption Costing and Variable Costing At the end of the first year of…
A: Using variable costing, only variable manufacturing costs are included in the product cost. Using…
Q: Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Andretti Company has a single product called a Dak. The company normally produces and sells 93,000…
A: Requirement 3: Relevant cost refers to the avoidable cost that will be incurred only if the decision…
Q: Services revenue Rent expense The following seven transactions produced the account balances shown…
A: If you have a cash account with such a brokerage firm, all securities transactions must be paid in…
Q: Problem 8-4 Multiple 1. The major financial statements include all, except a. Statement of financial…
A: You have asked multiple questions, we can only solve first question as per guidelines. If you want…
Q: Single Plantwide Factory Overhead Rate Scrumptious Snacks Inc. manufactures three types of snack…
A: Lets understand the basics. Single plantwide overhead rate is a rate at which overhead is allocated…
Q: buring the first month of its current fiscal year, Green Co. Incurred repair costs of $21,000 on a…
A: Green Co. incurred repair costs of $21,000 on a machine that had four years of remaining depreciable…
Q: a. What cost per unit should the cost system report to facilitate management decision making? Note:…
A: To determine the cost per unit, we need to consider both fixed and variable costs. The fixed cost is…
Q: The ledger accounts of AXX Internet Company appear as follows on March 31, 20X1: 101Cash $65,000…
A: Closing entries are those which are reported by the entity to close the temporary accounts of the…
Q: Following are the current asset and current liability sections of the balance sheets for Freedom…
A: Lets understand the basics. Working capital means a capital required to run a day to day business…
Q: Preble Company manufactures one product. Its variable manufacturing overhead is applied to…
A: Variance is the difference between the estimated values and the actual values. It is helpful is…
Q: Current Attempt in Progress The following amounts were taken from the financial statements of…
A: Return on Assets (ROA) is a financial ratio that measures how efficiently a company generates…
Q: Company sold machinery for $100,000 with terms 2/10, n/30 july 5. No discount was taken within the…
A: Journal Entry :— It is an act of recording transaction in books of account when transaction…
Q: Barefoot Co. purchased inventory from Nakasakasaka Co., a foreign supplier, on November 15, 20x1 for…
A: Journal Entry A journal entry is a format record that documents a sale in a journal.…
Q: 0 Petrini Corporation makes one product and it provided the following information to help prepare…
A: Cash collection budget :— This budget is prepared to estimate the collection of accounts receivable…
Q: To start her own business, Betty Hill put $25,000 of her personal cash into the business account.…
A: Lets understand the basics. There are various steps through which statement of financial position…
Q: flash city inc manufactures small flash drives and is considering raising the price by 75 cents a…
A: The decision relating to acceptance or rejection of price increase depends upon the resulting…
Tartufo Corp. entered into a 6-year lease agreement with Gelato Inc. to lease equipment beginning on January 1, 20X5. The IBR is 7% while the rate implicit in the lease is 6%. Tartufo Corp. is aware of the rate implicit in the lease.
Annual payments of $57,500 at the beginning of the year are required. The lease stipulates a $42,000 residual value guarantee but Tartufo Corp. expects a $12,000 payout will be required. Tartufo Corp. will return the equipment to Gelato Inc. at the end of the lease term. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)
Required:
Provide journal entries pertaining to this lease for Tartufo Corp. for the 20X5 year. Tartufo Corp. uses straight-line
Step by step
Solved in 2 steps
- Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
- Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.Sales-Type Lease with Guaranteed Residual Value Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows: The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option. The annual rentals are 65,000, payable at the end of each year. The interest rate implicit in the lease is 15%. Darwin agrees to pay all executory costs directly to a third party. The cost of the equipment is 280,000. The fair value of the equipment to Calder is 308,021.03. Calder incurs no material initial direct costs. Calder expects that it will be able to collect all lease payments. Calder estimates that the fair value at the end of the lease term will be 50,000 and that the economic life the equipment is 9 years. This residual value is guaranteed by Darwin. The following present value factors are relevant: PV of an ordinary annuity n = 8, i = 15% = 4.487322 PV n = 8, i = 15% = 0.326902 PV n = 1, i = 15% = 0.869565 Required: 1. Determine the proper classification of the lease. 2. Prepare a table summarizing the lease receipts and interest income earned by Calder for this lease. 3. Prepare journal entries for Calder for the years 2019, 2020, and 2021. 4. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the present value of next years payment approach to classify the lease receivable as current and noncurrent. 5. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the change in present value approach to classify the lease receivable as current and noncurrent.
- Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. Assume that Garvey is required to make payments on December 31 each year.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.
- On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line methodLessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.
