Requirements: a) State why this should be classified as a finance lease. b) Prepare the lease schedule. c) Prepare the necessary journal entries for July 1 2019 and June 30 2020.
Q: Assume that a newly implemented ABC system concludes that the number of orders placed is the best…
A: If for order filling activity cost driver is - No.of orders placed we have to allocate the total…
Q: Identify whether a debit or credit results in the indicated change for each of the following…
A: The General Rules of Debit and Credit are: All Debits increase Assets and Expenses. All Debits…
Q: A retrofitted space-heating system is being considered for a small office building. The system can…
A: The benefit-cost ratio (BCR) is a financial metric used to evaluate the feasibility of a project or…
Q: Indicate the principle, concept or constraint that best supports each of the following statements.…
A: List of all the Principles, Concepts and Constraints that will be used : 1.) Historical cost…
Q: You withdrew $21218 from your line of credit 3.5 years ago at an interest rate of 4% compounded…
A: FUTURE VALUE Future Value is the value of Current asset as on any future date. Future Value =…
Q: Mama Mia's Pizza purchases its creamy garlic dipping sauce from a supplier. Mama Mia's delivers…
A: Economic order quantity is the ideal units that the company should order/buy to meet the demand with…
Q: On January 1, 2024, the Mason Manufacturing Company began construction of a building to be used as…
A: Solution 1: Year 2024: Weighted-Average accumulated expenditure and interest capitalized Date…
Q: Recording journal entry after allocating transaction price to performance obligations -for the…
A: The amount of money earned by routine business operations is known as revenue, which is determined…
Q: In the Sales Transactions database, find the proportion of customers who used PayPal and the…
A: You would need to examine the payment method column in the sales transactions database to determine…
Q: Kisses Company manufactures spray cans of insect repellent. On August 1, 2019, the company had 9,800…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: (80%) erest (fixed) er Company 1,080,00 270,00 64,00 $ 206,00
A: Answer : Net income if sales increase by 40% : Miller Weaver Sales $1,890,000…
Q: An estate agent must ensure that the computerised accounting system for the estate agency business…
A: A trust ledger account is a type of accounting record used in businesses such as estate agencies,…
Q: Prepare journal entries to record the May 4 purchase and the May 3 and 16 sales. (Credit account…
A: A perpetual inventory system is a way to continuously and in-the-moment monitor inventory levels.…
Q: Parent buys building (useful life 10 years) for $3,000,000 on January 1, 2020. On that same date,…
A: Depreciation is the decrease in the value of capital assets. The company allocates the cost of…
Q: Some years ago, Junior Ltd established a defined benefit pension plan for its employees. The company…
A: The anticipated present value of all future pension benefits that employees would get as of a…
Q: < eTextbook and Media LA LA Prepare the owners' equity section of the balance sheet at December 31,…
A: A balance sheet is a type of financial statement that lists a company's assets, liabilities, and…
Q: On October 1, Novak Ltd. purchased 9% bonds with a face value of $1,000 for trading purposes,…
A: Accured Interest is that amount which is earned by the investor but not received till the close of…
Q: TipTop Flight School offers flying lessons at a small municipal airport. The school's owner and…
A: Revenue and spending variance :— It is the difference between flexible budget and actual results.…
Q: What is the purpose of the accounting cycle, and what are the different steps involved in it?
A: The accounting cycle is a systematic process used by businesses to record, classify, and summarize…
Q: Required: 1. Prepare a flexible budget performance report for July that includes revenue and…
A: Revenue and spending variance is calculated by subtracting the actual results of cost with flexible…
Q: This year Diane intends to file a married-joint return. Diane received $180,300 of salary and paid…
A: Adjusted gross income (AGI) refers to the amount of money gained by an entity which is further…
Q: Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to…
A: Solution 1: Quarterly lease payment 123990 *Present value annuity due @3% for 20 quarters…
Q: PROBLEM 1: UVW Company produces three products. Production and cost information is as follows: Units…
A: ACTIVITY BASED COSTING Activity Based Costing is a Powerful tool for measuring performance.…
Q: Write up the suspense account to clear the difference
A: Suspense account refers to the general ledger account which is being used for the temporary…
Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…
A: The right-of-use asset represents the rights obtained by the lessee to use the asset. This asset is…
Q: Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area…
A: For married couples, filing a combined tax return has several tax benefits over filing separately.…
Q: 2. Materials Price, Mix and Yield Variances SM-Ayala Merger produces the popular "3N1" Cologne that…
A: Dear student, as per bartleby guidelines we are supposed to answer only first 3 subpart of the…
Q: Refer to part 3 and now assume that the tax rate is 30%. How many units would need to be sold each…
A: The contribution margin is calculated as difference between sales and variable costs. The operating…
Q: In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The…
A: Activity rate :— It is the rate used to allocate manufacturing overhead to cost object under…
Q: Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts—the B300 and the…
A:
Q: You didnt answer the question 2 and 3 . Please could you give me details.
A: Predetermined overhead rate is calculated on the basis of the estimated cost and estimated hours,…
Q: On December 31, 2020, Berclair Inc. had 500 million shares of common stock and 22 million shares of…
A: The basic earning per share indicates the earnings attributable to a unit of a common share. The…
Q: Adjusting entry for Prepaid Insurance Windy Saloons purchased a 3 year insurance policy on 1st…
A: Prepaid expense: Prepaid expense means future expenses which are paid in advance. Initially, Prepaid…
Q: n October 2010 Reese acquired 100%
A: Gross income is the income on which tax liability is estimated.
Q: Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area…
A: The taxpayer pays taxes on the taxable income. The taxpayer is also allowed to take a deduction of…
Q: Problem 6-13 Discussion (IAA) An entity provided the following situations: 1. The entity's…
A: Intangible assets are assets that do not have physical substance and are non-monetary assets and…
Q: Your answer is partially correct. Prepare all entries required for 2024, including recognition of…
A: FV-NI stands for "Fair Value through Net Income." Accounting for securities under FV_NI is a method…
Q: Dominique and Terrell are joint owners of a bookstore. The business operates as an S corporation.…
A: Solution: Total Dominique (65%) Terrell (35%) Reporting Schedule Revenue $ 1,500,000…
Q: Permabilt Corporation was incorporated on January 1, 2022, and issued the following stock for cash…
A: The financial statements of the business include the income statement and balance sheet. The…
Q: Example 1 and 2 answers please
A: The process of documenting and disclosing the financial impacts of lease agreements on a company's…
Q: Required: 1. Prepare appropriate entries for Eye Deal to record the arrangement at its beginning,…
A: Accounting for leases is the practise of registering and disclosing in a company's financial…
Q: The Framework for Adjustments excludes which of the following? a. Cash Receipts b. Prepaid Expenses…
A: Journal Entry is the primary step to record the transaction in the books of accounts. Adjustment…
Q: Describe three actual team building activities- use actual costs if possible Write a proposal for a…
A: Departmental managers are responsible for developing budgets that reflect their department's…
Q: esent value of $3,950 to be received at the beginning values to 5 decimal places, e.g. 1.25124 and…
A: Answer : Interest rate = 5% Period = 29 Present value of annuity due (n=29, i=5%) = 15.89813
Q: Orion Iron Corporation tracks the number of units purchased and sold throughout each year but…
A: FIFO Method :— It is one of the method of inventory valuation in which it is assumed that old…
Q: “Accounting is vital to our economic system.” Do you agree? Give your reasons.
A: Accounting is a vital component of the economic system, as it plays a significant role in ensuring…
Q: Find the present value of $675 due in the future under each of the following conditions. Do not…
A: The time value of money (TVM) is a concept in finance that refers to the idea that money available…
Q: 5. Determine the amount of sales (units) that would be necessary under the proposed program to…
A: Particulars Calculation Amount in $ Amount in $ sales (A) Given 9136800 Less: variable cost…
Q: January 1, 2021, Novak Ltd. paid $316,289.83 for 12% bonds of Variation Ltd. with a maturity value…
A: Debt securities are the financial instrument which provides a fixed amount of interest to the…
Q: Yager Corporation purchased residential real estate several years ago for $245,000, of which $35,000…
A: Ordinary Income under Sec.291: Under Section 291 of the Internal Revenue Code (IRC), certain types…
On July 1, 2019, Cancer Ltd. signed an 8 year, non-cancellable lease agreement to lease a highly specialized MRI equipment from Aquarius Ltd. The agreement is non-renewable and requires the first payment of $50,397 every July 1, starting in 2019. The yearly rental payment includes $2500 of executory costs related to a maintenance contract on the equipment and at the end of the lease term, the machine reverts to the lessor. The machine has an estimated useful life of 12 years with an unguaranteed residual value of $22,000. Cancer Ltd. Uses the straight-line method of
Requirements:
a) State why this should be classified as a finance lease.
b) Prepare the lease schedule.
c) Prepare the necessary
Step by step
Solved in 3 steps
- 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.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.On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?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 method
- Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Lessee 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.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.
- 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.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 Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
