Section 2 - Q2 [Section 2 general information stays the same. It is repeated for your information.] Bentley Inc. (the lessor) leases an asset to Haley Corp. (the lessee) for four years. Data relating to this lease are provided below. Assume this lease is a capital lease in all parts below. Answer the following questions for Haley Corp. (the Lessee). 1. Lease is signed on 1/1/1 2. Lease term: 4 years 3. Remaining useful life of leased asset as of 1/1/1: 5 years 4. Cost of leased asset to lessor (less than FMV of leased asset): $35,000 5. Expected fair market value of leased asset on 12/31/4: $1,000 6. Expected fair market value of leased asset on 12/31/5: $6,000 7. Incremental borrowing rate and rate implicit in lease: 10% 8. Actual fair market value of leased asset on 12/31/4: $8,000 9. Actual fair market value of leased asset on 12/31/5: $5,000 10. Payments of $20,000 are to be made at the end of each year. Executory costs represent $2,000 of the $20,000 payment. 11. The lease contains a guaranteed residual value on 12/31/4 of $4,000. What is the annual depreciation, if any? Round your answer to the whole number. /yr

Section 2 - Q2 [Section 2 general information stays the same. It is repeated for your information.] Bentley Inc. (the lessor) leases an asset to Haley Corp. (the lessee) for four years. Data relating to this lease are provided below. Assume this lease is a capital lease in all parts below. Answer the following questions for Haley Corp. (the Lessee). 1. Lease is signed on 1/1/1 2. Lease term: 4 years 3. Remaining useful life of leased asset as of 1/1/1: 5 years 4. Cost of leased asset to lessor (less than FMV of leased asset): $35,000 5. Expected fair market value of leased asset on 12/31/4: $1,000 6. Expected fair market value of leased asset on 12/31/5: $6,000 7. Incremental borrowing rate and rate implicit in lease: 10% 8. Actual fair market value of leased asset on 12/31/4: $8,000 9. Actual fair market value of leased asset on 12/31/5: $5,000 10. Payments of $20,000 are to be made at the end of each year. Executory costs represent $2,000 of the $20,000 payment. 11. The lease contains a guaranteed residual value on 12/31/4 of $4,000. What is the annual depreciation, if any? Round your answer to the whole number. /yr

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.9E: Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual...

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Item4 Item 4 At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $32,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $73,596.) Crescent seeks a 9% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to the nearest whole dollar amount.) Required:1. What will be the effect of the lease on Café Med’s…
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Question 1: HKU Leasing agrees to lease equipment to Minion Furniture on January 1, 20X1. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 7 years. 2. The cost of the machinery is $700,000. The fair value of the asset on January 1, 20X1 is $700,000. 3. The lease contains a bargain purchase option of $60,000 exercisable at the end of lease term. At the end of the lease term, the asset reverts to the lessor and expected residual value is zero. Minion uses straight-line depreciation for all long-term assets. 4. HKU’s implicit rate is 6%, and Minion’s incremental borrowing rate is 6% 5. The lease is a non-cancellable lease. First payment is made in advance and the remaining payment are made on Dec 31 each year. Required: 1. Calculate the amount of the annual rental payment required. 2. Prepare journal entries to record the lease for HKU (lessor) for the year 20X1. 3.…
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1. Refer to Item 4. At what amount should the lease liability be recognized at January 1, 2022, after making the first payment of P260,000 to the lessor? 2. Assuming that the residual value of the two automobiles amounted to P150,000 at the end of the lease term, prepare the journal entry to record the transfer of the leased automobiles to the lessor.
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