Sur Food Corp., leased machine from Al-Urami Corp. the lease agreement for the O.R 750,000 (fair and present value of the lease payment) machine specified five equal payments at the enc of each year. The implicit interest rate was 9% Required: 1. Prepare the journal entry for Al-Urami Corp. at the inception of the lease on January 1, 2019. 2. Prepare an amortization schedule for the three-year term of the lease Note: Present value of an ordinary annuity of $1.n=5,i39% is 3.88965
Q: On January 1, 2021, Feline Financing Co. leased equipment to Kuting, Inc. information on the lease…
A: SOLUTION- EXPLANATION- YEAR ANNUAL LEASE PAYMENT (A) INTEREST ON LEASE RECEIVABLE (B)…
Q: The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and…
A: Amortization is the method of repaying a loan over time with monthly instalments. The straight-line…
Q: On January 1, 2020, Vcut Company entered in a five-year lease agreement with rentals of P100,000…
A: Lease liability: It is an obligation to pay lease payments over the lease term and is estimated…
Q: On December 31,2019, ABC Company signed a 5-year, non-cancelable lease for a machine with DEF…
A: A lease refers to when one party give assets for use to another party for a periodic payment and for…
Q: On December 31,2019, ABC Company signed a 5-year, non-cancelable lease for a machine with DEF…
A: A contractual agreement between two parties where one party agrees to obtain the right to use an…
Q: On January 1, 2021, Feline Financing Co. leased equipment to Kuting, Inc. information on the lease…
A: The useful life of the equipment is 5 years and the lease term is of 4 years. So We can say that it…
Q: On January 1, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information…
A: Minimum Lease Payment: It is the rental payments during the lease period. These annual rental…
Q: On July 1, 2020, Yum Company leased equipment to Burger Company for an 8-year period. Equal payments…
A: Lease is an agreement in which one party (lessor) provide its asset on lease to the other…
Q: On December 31, 2019, Skysong Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: Lease liability is the obligation on the lessee to make payments.
Q: On January 1,2020, ABC Company leased its equipment to DEF Company under a 3 year operating lease at…
A: Base Rent on operating lease is recognized on a straight line basis over the period of lease.…
Q: Required: Compute the appropriate entries for Winn Heat Transfer from the beginning of the lease…
A: The journal entries: In the books of Winn Heat Transfer Journal Entries Date Particulars LF…
Q: On January 1, 2020, Nge Company leased a building to Lol Corp. for a ten-year term at an annual…
A: Current liabilities: Liabilities that have to be paid within one year or one operating cycle,…
Q: On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information…
A: Solution A journal is the company's primary book which records all business transaction of business…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Carrying value of the right of use asset on Jan 1, 2021 = Present value of lease payment on Jan 1,…
Q: On January 1, 20x1, ABC Co. enters into a 4-year lease of office equipment. Annual rental payable at…
A: Lease is a contract whereby one party gives the right to use of the asset to another person who is…
Q: How would I record the necessary journal entries using this information? - It is an operating…
A: The following transactions are journalized for CAP.
Q: .. As an inducement to enter a lease, Legaspi Company, a lessor, grants Daraga Company, a lessee,…
A: Solution... Monthly rent expenses = P500,000 Rent starts from = 1st April Rent expenses on June…
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 January 1, 2019, Solitaire Company leased equipment for 7 years. The lease is correctly…
A: Lease classify as sale type lease means it is a financial lease where lessor has given right to use…
Q: Bravo Co. on January 1, 2021, enters into a nine-year non-cancelable lease for equipment having an…
A: (a) A finance lease is a lease by a Financial company where the legal owner of the leased asset…
Q: On January 1, 2020, Juris Company leased a building to Jay Company for a ten-year term at an annual…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: Lease:- Lease is an arrangement by which lessor gives the right to use an asset for given period of…
Q: On January 1, 2020, Oriole Company leased equipment to Daylight Corporation. The following…
A: In the above question, the lessee holds the assets for the substantial period of the economic…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation.…
A: 1. Semiannual lease payment = $648,358 Total semiannual payments = 4*2 = 8 Incremental borrowing…
Q: The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company…
A: Lease is a contractual arrangement between two or more parties in exchange of property and money for…
Q: On January 1, 2021, Nets Company entered into a lease contract with Denver Company for a new…
A: Lease refers to an agreement made between 2 parties for using the assets that are provided by the…
Q: Kaluzniak Corporation leased equipment to Moeller, Inc. on January 1, 2020. The lease agreement…
A: a. Operating lease: An operating lease is as often cancellable and incorporates maintenance.…
Q: On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a…
A: The lease gives the right to the person to use the asset without purchasing that asset.
Q: On August 1, 2019, PhaAviation leased two helicopters from WayoAircraft for an initial period of 12…
A: Answer: How much is PhaAviation’s rent expense for the year ended December 31, 2019? Correct answer…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation.…
A: Present value = $4,900,002 Pretax amount for liability = $3,906,074 Pretax amount for…
Q: Frontier Inc. enters into an 8-year lease contract to lease equipment with a useful life of 8 years.…
A: Journal Entries in the books of Frontier Ince( Lessor) Date Particulars Dr Cr Jan-1,2020…
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: It is an agreement whereby the Lessee secures the right to use the asset but not its ownership.
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Right of use asset as on January 1,2021 = present value of lease payments + initial direct cost =…
Q: Timmer Company signs a lease agreement dated January 1, 2019,that provides for it to lease equipment…
A: Lease refers to the contractual agreement where user pay the owner for using the asset and the…
Q: On March 31, 2018, Southwest Gas leased equipment from a supplier and agreed to pay $200,000…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
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 January 1, 20x7, Blaugh Co. signed a long-term lease for an office building. The terms of the…
A: Interesrt expense for the year 20x7 = Present value of lease liability on January 1, 20x7 x rate of…
Q: On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment…
A: 1.
Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…
A:
Q: Abert, Inc. signed a five year lease of equipment on January 1, 2021. The lease was classified as an…
A: It is a lease agreement in which the right to use an asset is transferred but the ownership rights…
Q: On 10 December 2019, Food Complex Inc. (a private company) entered into a nine-year agreement to…
A: Lease term 9 year Fair value of the asset= $180100 Incremental borrowing rate= 9% Lease payments=…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The…
A: Formulas:
Q: payments.) c. Prepare the journal entry or entries, with explanations, that Ludwick should record…
A:
Q: Dream Company leased equipment for its nine-year economic life, agreeing to pay P500,000 at the…
A: Answer - As per IFRS 116 lease - lease liability is calculated on commencement date of Lease i.e…
Q: On March 31, 2021, Southwest Gas leased equipment from a supplier and agreed to pay $200,000…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of…
A:
Step by step
Solved in 2 steps with 2 images
- 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.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).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.)
- 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.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.
- 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.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.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.
- 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?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 method