Rick Kleckner Corporation recorded a right-of-use asset for $300,000 as a result of a finance lease on December 31, 2019. Kleckner's incremental borrowing rate is 8%, and the implicit rate of the lessor was not known at the commencement of the lease. Kleckner made the first lease payment of $48,337 on December 31, 2019. The lease requires eight annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Kleckner's December 31, 2020, entries.
Q: On December 31, 2019, Shamrock Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: Amortization Expense = Right of use asset / Lease term = 34,104/5 = $6,821
Q: At January 1, 2021, Cafe Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: Lease :— A lease is a contract outlining the terms under which one party agrees to rent an asset—in…
Q: Teal Mountain Corporation recorded a right-of-use asset for $284,000 as a result of a finance lease…
A: working note : Lease liability=52373-30112 =22,261 Interest Expense=(284000-52373)*13%=30,112 2)…
Q: Kingbird Corporation recorded a right-of-use asset for $289,600 as a result of a finance lease on…
A: Amortization is an accounting technique used to periodically lower the book value of a loan or…
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: A lease is an agreement where one party provides the right to use the asset in exchange for periodic…
Q: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
A: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
Q: obie Company leased an equipment to a lessee on January 2, 2020 under a direct financing lease with…
A: A lease is a contractual arrangement where the lessee pays for the use of an asset to the lessor.
Q: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The…
A: a.Compute the amount of the lease receivable.
Q: On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of…
A: Total amount receivable = Annual lease payment x 6 = 100000 x 6 = P600,000
Q: On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of…
A: Total amount receivable = Annual lease payment x 6 = 100000 x 6 = P600,000
Q: On January 1, 2018, Jasperse Corporation leased equipment under a finance lease designed to earn the…
A: Annual payments = $ 75000 Lease agreement period = 10 years Rate of return = 12 % Annual maintenance…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: The question is related to Accounting for Lease. The assets has been given for 10 years by lessor…
Q: On January 1, 2021, Elle Company acquired a machine by signing a five-year lease. Annual rentals of…
A:
Q: EQUIRED: a.) At what amount should Diana record the leased asset at January 1,2020? b.) Prepare the…
A: Lease Payment 86,680 Lease Term 5 year Unguaranteed Residual Value 50000 fair value of the…
Q: At the beginning of 2021, Killion Co. leased furniture to GameStop under a seven-year operating…
A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…
Q: On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best…
A: Future inflows include guranted residual cash flows
Q: Tamarisk Corporation recorded a right-of-use asset for $259,700 as a result of a finance lease on…
A: Computation of Carrying value of Lease Date Payment Interest expense Principal payment Carrying…
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Annual payment = $8,148 Borrowing rate = 10% PV Factor = 4.16987
Q: On January 1, 2016, Renee Corp., a lessee, signed a five-year capital lease for new equipment. The…
A: The last entry made by Renee is an entry for the loss on residual value.
Q: On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best…
A: It is pertinent to note that lease liability includes all the fixed lease payments made on the lease…
Q: On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best…
A: Right to use asset consists of the following items - a) Present value of all the lease payments…
Q: What is Daniel's right of use of asset at December 31, 2016?
A: Welington Company purchased a new machine for P4,800,000 on January 1, 2016 and leased the same to…
Q: Shamrock Corporation recorded a right-of-use asset for $187,600 as a result of a finance lease on…
A: A lease is a written agreement that indicating the conditions within which a lessor acknowledges to…
Q: On January 1, 2019, ABC Co. entered into a 5-year lease for a construction equipment. ABC Co.…
A:
Q: MORTON KOOPA JR. Inc. is on the business of financing and leasing machineries. On August 1, 2021,…
A: Given data: Annual lease payment = 100,000 Lease term = 6 years IRR = 10%
Q: On December 31, 2019, Burke Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: a.) As per the question, it appears as an operating lease because the ownership rights are retained…
Q: Wildhorse Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: 1. What will be the effect of the lease on Crescent’s earnings for the first year? Since it is a…
Q: On January 1, 2019, Steward Co. signed an 8-year non-cancelable lease for a new, machine, requiring…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On January 2, 2021, Blossom, Inc. signed a 10-year noncancelable lease for a heavy duty drill press.…
A: The aggregate total present value is = $ 1720479 The drill press has useful life 15 years…
Q: a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant…
A: Leasee Magnitude Ltd Term of Lease 3 years Use full life of Plant 7 years Lease Rental…
Q: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The…
A: Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020.The…
Q: On March 31, 2020, Ahlam Corporation signed a 5-year noncancelable lease for a machine. The terms of…
A:
Q: Autocar Company leased a machine to a lessee on January 2, 2020 under a direct financing lease with…
A: Definition: A lease is a contractual arrangement where the lessee pays for the use of an asset to…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: Depreciation refers to the reduction in the sum value of an asset over a course of time that…
Q: On December 31, 2019, Shamrock Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: The question is related to Accounting for Lease. As per IFRS 16 Leases there are two types of lease…
Q: Rayleigh Company had an asset costing P 5,239,000. The asset was leased on January 1, 2020 to…
A: A lease is a contract between the parties that provides the right to use the asset for an agreed…
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: Please find the answer to the above question below:
Q: On January 1, 2020, Dulcinea Company enters a ten-year noncancelable lease for equipment having an…
A: A lease is a contract between two parties under which the owner of the asset (lessor) gives…
Q: On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: A lease is a written agreement that indicating the conditions within which a lessor acknowledges to…
Q: On January 1, 2021, Elle Company acquired a machine by signing a five-year lease. Annual rentals of…
A: Right-of-Use Machine shall be measured at Present Value of Future lease payments value upon Initial…
Q: On December 31, 2019, Sin Company signed a five-year, non-cancelable lease for a machine with…
A: Right of Use Asset (ROU) is calculated as present value of lease payments. This will be recorded in…
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A:
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: 1) Effect of the lease on Café Med’s earnings for the first year $…
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Answer: As per given -
Q: On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best…
A: Future inflows include guaranteed residual cash flows
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: Depreciation (Straight line method) = (Cost of the assets - Salvage value) / Life of the assets
Q: At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: Solution 1 Right to use assets Annual lease payment 28000 *cumulative PV factor for…
Rick Kleckner Corporation recorded a right-of-use asset for $300,000 as a result of a finance lease on December 31, 2019. Kleckner's incremental borrowing rate is 8%, and the implicit rate of the lessor was not known at the commencement of the lease. Kleckner made the first lease payment of $48,337 on December 31, 2019. The lease requires eight annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Kleckner's December 31, 2020, entries.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- 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.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 August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
- 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 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.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 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.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.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 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.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.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.)