This is a multiple answer question meaning the correct answer could be one or more of the choices below. On January 1, 2024, Wingham Company leased equipment from Earnest Leasing Company. The cost and fair value of the equipment is $200,000. The present value of the lease payments is $120,000. The lease qualifies as an operating lease. When the lease is executed, Wingham should: A. credit lease payable for $200,000 B. debit right-of-use asset for $120,000 C. debit right-of-use asset for $200,000 OD. credit residual asset liability for $80,000 O E. credit lease payable for $120,000
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- 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.Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
- Cullumber Company leased equipment from Ayayai Company on July 1, 2025, for an eight-year period expiring June 30, 2033. One of the lease terms is a guaranteed residual amount of $13200. The residual expected by Cullumber will be $8100. The lease meets the criteria of a finance lease. What is the residual value amount that would be included in the calculation of Cullumber's lease liability/right- of use asset? The present value of $8100. The present value of $13200. The present value of $5100. The residual would not be included in the calculation of the lease liability/right-of-use asset.The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. Inception date: May 1, 2025 Annual lease payment due at the beginning of each year, beginning with May 1, 2025: $30,000 Bargain-purchase option price at end of lease term = $10,000 Lessor's implicit rate = 7% The lease term ends in FIVE years on April 30, 2030. What is the present value of the asset being leased? Recommendation: draw a timeline of the cash flows from the lessee to the lessor. Your Answer: AnswerThe information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning ofeach year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term,guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 12% January 1, 2020 The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $65,500. The lessee uses the straight-line depreciation method for all equipment. Instructions(iii)Record the first year’s depreciation on Telsan Company’s books. (iv) Record interest expense and lease liability for Telsan Company for the year ending December 31, 2020. (v) Discuss the nature of this lease to Simmonds Leasing Company.
- The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning ofeach year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term,guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 12% January 1, 2020 The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $65,500. The lessee uses the straight-line depreciation method for all equipment. Instructions(i) What is the lease liability for Telsan Company? ii) Record the lease on Telsan Company’s books at the date of inception. (iii)Record the first year’s depreciation on Telsan Company’s books. (iv) Record interest expense and lease liability for Telsan Company for…This is a two part question: 1. List the criteria used for determining if a lease agreement is accounted for as a capital lease. 2. Using the criteria, is the lease described below a capital or operating lease? On January 1, 2017, Burke Corporation signed a 5 year noncancelable lease for a machine. The terms of the lease called for Burke to make annual payments of $8,668 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Burke uses the straight-line method of depreciation for all of its plant assets. Burke's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown.Help Save & Ex On September 30, 2024, Truckee Garbage leased equipment from a supplier and agreed to pay $140,000 annually for 15 years beginning September 30, 2025. Generally accepted accounting principles require that a liability be recorded for this lease agreement for the present value of scheduled payments. Accordingly, at inception of the lease, Truckee recorded a $1,405,261 lease liability. Required: Determine the interest rate implicit in the lease agreement. Note: Use tables, Excel, or a financial calculator. Round your answer to 1 decimal place. (FV of $1, PV of $1, EVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) Interest rate implicit %
- The details of the equipment lease agreement that Taj Corp. (lessee) recently entered into with Stanger Leasing (lessor) are: Commencement date: January 1, 2019. ■ Term of lease: 12 months. Payments: $1,000 per month first due at the commencement date. Other: Title does not transfer and the lease does not include any renewal or purchase options. Interest rate implicit in the lease: Lessee not able to readily determine. Incremental borrowing rate: 9% per annum (0.75% per month). Estimated useful life of equipment: 8 years. Depreciation method: Straight-line. Year end: December 31. Assume that Taj Corp. does not elect to expense leases of a short-term nature. Prepare the journal entry for January 31, 2019.On September 30, 2024, Truckee Garbage leased equipment from a supplier and agreed to pay $125,000 annually for 15 years beginning September 30, 2025. Generally accepted accounting principles require that a liability be recorded for this lease agreement for the present value of scheduled payments. Accordingly, at inception of the lease, Truckee recorded a $1,214,031 lease liability. Required: Determine the interest rate implicit in the lease agreement. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Interest rate implicit % 2Prepare the journal entries that the lessee should make to record the following transactions. The lessee makes a lease payment of $80,000 to the lessor in an operating lease transaction. Veatech Company leases a new building from Joel Construction, Inc. The present value of the lease payments is $700,000.The lease qualifies as a capital lease.