Un January 1, 20x1, Inverse Co. leased a piece of equipment to reimburse, Inc. Information on the lease is as folloWs. Cost of equipment- P600,000 Useful life of equipment- 5 years Lease term- 4 years Annual rental payable at the end of each year - P220,000 The annual lease payment includes P18,098 pertaining to non-lease component. This amount reflects the stand alone selling price of the service. Inverse Co. incurred P40,000 initial direct costs in negotiating the lease. The interest rate implicit in the lease is 10%. How much are (1) the total interest revenue that Inverse Co. will recognize over the lease term and (2) the carying amount of the net investment in the lease on December 31 20x1? O a. 172,342; 462,098 O b. 167,608; 502,098 O . 176,904; 542,098 Od 1 67 G09. G42
Q: On January 1, 20x4 Bobcat Coffee leased a smoothie machine from Smoothie LLC. Smoothie LLC purchased…
A: Finance lease- A finance lease is a kind of lease in which a finance corporation is classically the…
Q: On December 31, 2018, LLM Company reported total costs of OR 650,000 incurred on Lease C that was…
A: Step 1 Journal is part of book keeping.
Q: Wall Co. leased office premises to Fox, Inc. for a five-year term beginning January 2, 20x9. Under…
A: Rent receivable refers to the amount which is payable to you and not yet received.
Q: On January 1, 20x1, IMBROGLIO Co. (lessor) leased a piece of equipment to COMPLICATION, Inc.…
A: Solution: Gross investment in lease = Total amount of lease payments - First lease payment
Q: On January 1, Year 1, Drake Co. leased equipment from Brewer, Inc. Lease payments are $100,000,…
A: Since there are multi sub-parts, we are going to solve first three for you. To get the remaining…
Q: On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires…
A: Leases is a form of contract or arrangement between two parties under which one party provides it's…
Q: Rachel Company used leases as a method of selling products. In the current year, Rachel Company…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: (AICPA) . On July 1, 20x6, Gee, Inc., leased a delivery truck from Marr 9. Corp. under a 3-year…
A: The accrual income is the income earned but not received yet. It is an asset for the business.
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: Aragon Co. leased an equipment to a lessee on January 2, 2010 under a direct financing lease with…
A: Aragon Co. leased an equipment to a lessee on January 2, 2010 under a direct financing lease with…
Q: On July 1, 2021, Gee Company leased a delivery truck from Marr Company under a 3-year operating…
A: 1. Accrued Income - Accrued income is the income that is due but not received yet. Accrued income is…
Q: July 1, 20x5, payments under the lease are P600,000 and are due on July 1 of each year. The first…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On January 1, 2010, Gallant Company entered into a lease agreement with Blacksheep Company for a…
A: Calculation of Present Value of minimum lease payments: Payment Date Year Lease Payment Discount…
Q: On January 1, 20x1, IMBROGLIO Co. (lessor) leased a piece of equipment to COMPLICATION, Inc.…
A: Annual rent payable at the start of each year P4,00,000 Present value of an annuity due of 1 at…
Q: 19. Winn Co. manufactures equipment that is sold or leased. On Dec 31, 20x6, Winn leased equipment…
A: Given information, Normal sales price of the equipment =P77,000 Cost =P60,000 This is a capital…
Q: On January 1, 20x1, DEMENTED Co. leased office furniture from INSANE, Inc. Payments on the lease…
A: As per IFRS 16, Leases, there is an exemption for leases of low-value assets where there is no need…
Q: On January 1, 2019, Inside Company purchased equipment. On the same date, Inside Company leased the…
A: Average annual lease payment = total lease payment / lease term =…
Q: On 1/1/21, Elliott Company leased machinery with a fair value of $1,185,000 from Greene Corporation.…
A: Lease is an agreement between leaser and lessee in which leaser allows lessee to use her land…
Q: During the year ended 30 September 20X4 Hyper entered into two lease transactions: On 1 October…
A: We have the following information: On 1 October 20X3 a payment of $90,000, being the first of five…
Q: On July 01, 2011, a company leased a piece of land under a 3-year lease. Total rent for the term of…
A: Note: Under an operating lease, total rent revenue for the lease period is allocated to income over…
Q: Sub Zero, Inc, an equipment manufacturer, leased a freezer to commercial Kitchen company on January,…
A: Journal entries represent the recording of transactions over the course of an accounting year, and…
Q: On January 1, 20x1, ABC Co leased equipment to XYZ, on the lease is shown below. Inc. Information…
A: To determine the total interest earned over the lease term, we will prepare amortization schedule.…
Q: On January 1, 2020, Sitra Company leased equipment from National Corporation. Lease payments are…
A: As per IFRS 16, Leases, lease liability, and right of use assets are recognized on commencement of…
Q: On January 1, 2019, Inside Company purchased equipment at a cost of P5,000,000 with a useful life of…
A: solution given cost of equipment =5000000 useful life =10 years annual depreciation…
Q: Cady Salons leased equipment from Smith Co. on January 1, 2021, in an operating lease. The present…
A: Interest expense for Year 2021 = (Present value of the lease payments - Annual lease payment)*rate…
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 warehouse equipment from IC Leasing Corporation. The…
A: 1. Calculate pre-tax lease reported in balance sheet At December 31, 2021: Working:
Q: On January 1, 20x1, ABC Co leased equipment to XYZ, on the lease is shown below. Inc. Information…
A: First of all, we have to calculate the Present value of lease liability using 12% Present value of…
Q: On January 1, 20x1, Sunset Co. leased a machine from April, Inc. Information on the lease is as…
A: Since you have posted a question with multiply subparts, we will solve the first three subparts for…
Q: Manufacturers Southern leased high-tech electronic equipment from International Machines on January…
A: Fair value of asset in lease: Calculate the fair market value of the leasehold interest using the…
Q: Manufacturers Southern leased high-tech electronic equipment from International Machines on January…
A: A lease is an arrangement where a lessor agrees to allow a lessee to control the use of the asset…
Q: On January 1, 20x1, Chantaly Bars Co. leased equipment to NJA Inc. Information on the lease is shown…
A:
Q: On January 1, 20x1, ABC enters into a 4-year lease of office equipment. The rent in 20x1 is…
A: SOLUTION- EXPLANATION- LEASE RENTALS FOR YEAR. 20X1 10000 20X2 11000 (10000*110%) 20X3…
Q: How much is the total financial revenue over the lease term? What amount should be reported as gross…
A: Given information is: Rachel Company used leases as a method of selling products. In the current…
Q: 10. On July 1, 20x6, Entity A leased a delivery truck from Entity B under a 3-year operating lease.…
A: Given that entity A leased the delivery truck on July 1st, 20X6 and rent payment need to be done…
Q: July 1, 2018, Gee Company leased a delivery truck from Marr Compar 3-year operating lease. Total…
A: Rent Revenue is name of an income statement account that showsamount of rent earned during time…
Q: On June 30, 2018, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease…
A:
Q: Determine the unearned interest income on January 1,2020. Determine the gross profit on sale.…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: YK Incorporated leased road building equipment from Bajan Leasing on January 1, 2021. Bajan…
A: It is given that, the lease term is of 2 years with 4 semi-annual lease payments. The fair value of…
Q: : On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires…
A: 1. Installment amount = $13,000 2. No. Of installments = 5 P. V factor for 0-4 years = 1+…
Q: 14. On January 1, 20x1, Chirp Co. leased out to Tweet Inc. a machine, which Chirp Co. has recently…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The…
A: Formulas:
Q: On January, 20x8, Harrow Co. as lessee signed a five-year non-cancelable equipment lease with annual…
A: Lease is an agreement between two or more than two parties, in which one party provides its asset…
Q: King Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease…
A:
Q: On January 1, 2020, Sitra Company leased equipment from National Corporation. Lease payments are…
A: Lease is an arrangement under which lessor gives right of use of the leased asset to the lessee for…
Can Please Help Me: Accounting / Intermediate Accounting 2
60 minutes only the given time. Wish you could help me.
I will give UPVOTE and GOOD FEEDBACK.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- 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.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).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.
- 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.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.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 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 methodSales-Type Lease with Guaranteed Residual Value Calder Company, the lessor, enters into a lease with Darwin Company, the lessee, to provide heavy equipment beginning January 1, 2017. The lease is appropriately classified as a sales-type lease. The lease terms, provisions, and related events are as follows: The lease is noncancelable, has a term of 8 years, and has no renewal or bargain purchase option. The annual rentals are 65,000, payable at the end of each year. The interest rate implicit in the lease is 15%. Darwin agrees to pay all executory costs directly to a third party. The cost of the equipment is 280,000. The fair value of the equipment to Calder is 308,021.03. Calder incurs no material initial direct costs. Calder expects that it will be able to collect all lease payments. Calder estimates that the fair value at the end of the lease term will be 50,000 and that the economic life the equipment is 9 years. This residual value is guaranteed by Darwin. The following present value factors are relevant: PV of an ordinary annuity n = 8, i = 15% = 4.487322 PV n = 8, i = 15% = 0.326902 PV n = 1, i = 15% = 0.869565 Required: 1. Determine the proper classification of the lease. 2. Prepare a table summarizing the lease receipts and interest income earned by Calder for this lease. 3. Prepare journal entries for Calder for the years 2019, 2020, and 2021. 4. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the present value of next years payment approach to classify the lease receivable as current and noncurrent. 5. Next Level Prepare partial balance sheets for December 31, 2019, and December 31, 2020, showing how the accounts should be reported. Use the change in present value approach to classify the lease receivable as current and noncurrent.