The following information relates to Wilson, Inc.'s equipment lease with an inception date of January 1: • Fair value of equipment at lease inception, $91,200 • Lease term, 4 years • Economic life of property, 5 years • Implicit interest rate, 6% • Annual lease payment due on December 31, $25,600 • Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. By how much does the lease liability decrease during the first year? Select one: a. $20,128 b. $5,322 c. $25,600 O d. $20,278
Q: Corporations recognize no gain orloss when it issues stock shares for property even if the sharehold...
A: Section 351 states non recognition or not recording of the gain or loss on the property transfers i...
Q: 8. A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. Th...
A: In this question, we will find out the total amount paid for merchandise.
Q: Johnson Corporation’s bank statement for October reports an ending balance of $22,381,whereas Johnso...
A: A bank reconciliation statement reconciles an entity's bank account with its financial records by su...
Q: 7. Received Php20,000 for the sale of a lot a. Debit cash, Credit Commission Income b. Debit Cash, ...
A:
Q: Last period Hartig Corporation sold 40.000 units, total sales were $303.000, total variabie expenses...
A: Formula: Contribution margin ratio = ( Contribution margin / Total sales ) x 100
Q: The accrued obligation at the beginning of the year was S456,000 and the current service cost for th...
A: Formula: Interest expense = Accrued obligation beginning balance x Interest rate
Q: Augustus Electrical Company has 2 divisions, one in Georgetown and one in Berbice Guyana and inform...
A: Return on investment (ROI) is a relative measure to measure a divisional performance in the organiza...
Q: Landis Co. purchased P500,000 of 8%, 5-year bonds (DI@FVTOCI) from Ritter, Inc. on January 1, 2022, ...
A: Profits on readily available-for-sale securities with easily determined fair values should be record...
Q: The following data were included in a recent Mango, Inc. annual report ($ in millions): In milli...
A: The fixed assets turnover ratio is calculated as net sales divided by average fixed assets. Fixed as...
Q: i need that last two parts (D AND E)
A: 2021 2022 Units Produced 60000 50000 Units Sold 54000 54000 Selling Price per Unit $ ...
Q: Hey, can I please be helped with the following task and please show calculations on how you got the ...
A: Journal Entries
Q: ase r
A: In this question, we have to solve different parts according to the question.
Q: Valley Hospital measures the in-patient occupancy of the hospital by determining the number of patie...
A: Disclaimer: “Since you have posted a question with multiple sub-parts, we will solve first three sub...
Q: Cobb Company's accounting records show the following at the year ending on December 31, 2015: Purcha...
A: Cost of goods sold = Cost of goods available for sale - Ending inventory where, Cost of goods availa...
Q: Required: Briefly explain whether the $7,000 and the $180,000 receipts constitutes ordinary income' ...
A: The answer for the question on ordinary income is discussed hereunder: What is ordinary income? Inc...
Q: The manufacturing company of Wellington has collected the given information to develop predetermined...
A: Lets understand the meaning of plantwide overhead rate and departmental overhead rate. In plantwide ...
Q: Actual Costing Production Cost, Unit Cost, Net Income and Inventories 2. CABADBARAN CORP., produces ...
A: Using throughput costing method, the direct materials cost is treated a variable cost and other manu...
Q: If an employee has the chance of receiving cash in lieu of lodging when traveling for legitamate bus...
A: The employee may exclude the value of the meals and lodging from the gross income for purpose of fed...
Q: Fish Galore Corp. bought 25% of Fin Chaser Corporation's stock for $70,000 on January 1, 2020. Durin...
A: Journal entries for investment are based on the percentage of the acquisition.
Q: When an owner-occupied property is transferred to investment property at fair value, a decrease in t...
A: Investment Property: The acquisition of an investment property is made with the purpose of generatin...
Q: Steve’s Outdoor Company purchased a new delivery van on January 1 for $58,000 plus $4,900 in sales t...
A: In this question, There are 4 requirements : 1.Indicate the effects of each transaction on the accou...
Q: a. In each of the 3 months, what amount of overhead was applied to the production? b. For each of th...
A: Solution:- Given, Britannica Motor Vehicle Accessories applies overhead utilizing a combined rate fo...
Q: Use the information provided to answer the questions. Actual price paid per pound of material $14.00...
A: The variance is the difference between the actual data and standard output of the production.
Q: Bank of China has the following items on its balance sheet. Require reserves of $150 billion Excess...
A: The balance of payments for a country or nation is comparable to a balance sheet for a company or bu...
Q: At what amount should the biological assets be recognized on December 31, 2022?
A: Biological assets are those assets which are having the feature of living like the cows and the plan...
Q: Outline the anti-avoidance provisions as they relate to the transfer of property to a child, a trust...
A: General Anti-avoidance Rule (GAAR) is a concept which generally empowers the Revenue Authority in a ...
Q: 11. Debt investments at fair value through other comprehensive income are initially measured at fai...
A: According to IFRS guidelines initial measurement of the Debt investment which can be either recogniz...
Q: The NiceWay Corporation's statement of financial position shows the total stockholders' equity of P5...
A: Stockholder's equity: Stockholder's equity refers to the net asset of the company available to the s...
Q: Given the dual effects of accountable events, an decrease in an asset cannot possibly be accompanied...
A: Assets = Liabilities + Stockholders equity Every transaction has dual effect . The question is rela...
Q: According to the islam (2000) article "Comparative Advantage and Trade Balance in U.S. Agricultural ...
A: In the case of agriculture, the United States has a comparative advantage. We are the world's larges...
Q: Part III Record the following T Accounts 1. Recorded revenue from cash patients of $30,000.00 2. Pai...
A: Cash Debit Credit Sno Particulars Amount Sno Particulars Amount 1 Service Re...
Q: 22. The account "wages payable" would appear in the income statement True O False 23. Buying goods a...
A: Solution In accrual accounting , expenses and revenues are recognized in the period when they are e...
Q: double-entry bookkeeping system which of the following may be used as basis for ecognizing income an...
A: Double entry bookkeeping system is the system of accounting in which every transaction has effect on...
Q: The ledger of Sheffield Corp. at the end of the current year shows Accounts Receivable $80,300; Cred...
A: If bad debt expense is 11% of accounts receivable = $80300×11% =$8833
Q: The purpose of schedule M-1 is to reconcile net income per tax return with net income per books
A: As per our guidelines we provide solution to one question only but you have asked four multiple choi...
Q: n asphalt road requires no repairs until the end of 2 years. At the end of 3rd year, P90, 000 will b...
A: asphalt road Year Cash Flow 1 0 2 0 3 90000 4 90000 5 90000 6 90000 7 90000 8 120...
Q: A family friend has asked your help in analyzing the operations of three anonymous companies operati...
A: The question is related to Ratio Analysis. The Retun on Investment is calculated with the help of fo...
Q: Discussion Question 8-6 (LO. 2) How is cost recovery computed for an asset, in the year it is placed...
A: If the mid-quarter convention applies, the property is treated as though it were disposed of at the ...
Q: The entity shall measure a non-current asset that ceases to be classified as held for sale at the lo...
A: Non-Current Asset: Noncurrent assets are long-term investments made by a corporation that cannot be ...
Q: eston Products manufactures an industrial cleaning compound that goes through three process- ing dep...
A: Process costing is a costing method which is mainly used where similar goods are produced in a mass ...
Q: Proposed Pricing for two models under consideration Selling Price $299.00 Base $399.00 Deluxe Variab...
A: Lets understand the basics. Break even point is a point at which no profit/no loss condition arise. ...
Q: What types of special revenue funds are beneficial?
A: Funds are the balance which has been kept by the company or the government so that any contingencies...
Q: Paid for gas and oil used in the service car, Php1,500. a. Debit gas and oil, Credit cash b. Debit ...
A: Solution: As per double entry bookkeeping system every transaction affects atleast two accounts; one...
Q: 2. The following items were deduced from the accounting records of JC Company's income statement for...
A: Administrative expenses are those business expenses which are used in office and by the administrati...
Q: 2. Paid the other half of the account due to C. de Leon. A. Debit Cash, Credit Accounts Payable B....
A: This transaction will reduce cash account balance and accounts payable balance. Accounts Payable Bal...
Q: Part III Record the following T Accounts 1. Recorded revenue from cash patients of $30,000.00 2. Pai...
A: A T-account is an informal term for a set of financial records that use double-entry bookkeeping. It...
Q: Accounting for Income Taxes Dunkin, Inc. reported revenues of $150,000 and expenses of $70,000 in ea...
A: Here in this question, we are required to calculate tax expense as per GAAP and as per taxation. For...
Q: Retiring allowances are also known as: Multiple Choice Lieu of notice Parting gifts Bonuses Suppleme...
A: Retiring Allowances are also known as Severance Pay. These are the allowances are paid to employees ...
Q: 1. Materials were purchased on account for $35,425. 2. Materials were requisitioned to begin work on...
A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in...
Q: Required: Compute the following variances in terms of contribution margin: 1. Compute the total sale...
A: Furniluxe manufactures two types of study desks - one for the residential market other for the scho...
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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).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 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.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.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.)
- 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 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 and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations 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 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