urn of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must cho
Q: On December 31, 2019, Beam Company leased equipment to Forth Company for a four-year period ending…
A: Normal Sale Price = P365,760 Lease period = 4 years First payment = Dec31,2019 Annual payment =…
Q: On January 1, 2016, the Millwork Company signed a four-year non-cancelable lease of equipment from…
A: The question is based on the concept of Lease Accounting.
Q: Skkrrt Company entered into a lease agreement for the use of a new equipment on January 1, 2020. The…
A: Lease liability is an accounting term that refers to the financial obligation to make payments that…
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: Novak Corporation leased equipment to Windsor, Inc. on January 1, 2020. The lease agreement called…
A: Amount to be recovered through lease = Fair Value of Leased Asset - Present Value of Unguaranteed…
Q: llapse question part (a) Prepare the journal entries, that Bridgeport should record on December 31,…
A:
Q: On January 1, 2020, Dufferin Corp. enters into a 10-year non-cancellable lease with Pine Ltd. to…
A: Finance lease: A finance lease or capital lease is a type of lease in which a finance company is…
Q: Prepare Sheridans' December 31, 2019, journal entries assuming the implicit rate of the lease is 10%…
A: Particular year Cashflow PVF@ 10% PV of cashflows Lease receipts 0 $36100.00 1.000 $36100.00…
Q: On December 31, 2019, Lewis Corp. (Lewis), a publicly accountable entity, leased a tractor from Jade…
A: Right of Use Asset-Lease: It is a right of lessee to utilize a leased item(property or equipment)…
Q: Carla Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5…
A: A lease is an agreement where an asset is taken on rent and Lessor receives Lease rental in…
Q: On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of…
A: Total amount receivable = Annual lease payment x 6 = 100000 x 6 = P600,000
Q: ClevelandInc. leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract…
A: Lease Assets:- A leased asset is an asset that has been let out by the lessor to the lessee for the…
Q: On December 31, 2020, the lessor company leases equipment to the lessee company with 8 equal annual…
A: When an asset is provided by the lessor to the lessee who requires that particular asset, then this…
Q: On January 1, 2019, Cage Company contracts to lease equipment for 5 years, agreeing to make a…
A: The chartered instrumentation is to be promoted at $550,000This implies there's associate choice to…
Q: On January 1, 2021, The Madrid Telephone Co. leased diagnostic equipment from Carlota Corp. The…
A: On 01.01.2021, Madrid Telephone Co. leased diagnostic equipment Annual lease payments = $85000 each…
Q: At the beginning of 2021, Killion Co. leased furniture to GameStop under a seven-year operating…
A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…
Q: Krawczek Company will enter into a lease agreement with Heavy Equipment Co. where Krawczek will make…
A: SOLUTION- COMPUTATION OF PRESENT VALUE OF LEASE PAYMENTS AS- FORMULA- PRESENT VALUE = ANNUAL…
Q: On December 31, 2020, Roque Company leased machinery with a fair value of $1,260,000 from Sage…
A: Particulars Amount $ Lease rentals (A) 240000 Present value of annuity due of 1…
Q: On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of…
A: Total amount receivable = Annual lease payment x 6 = 100000 x 6 = P600,000
Q: Prepare Pina’ journal entries on January 1, 2020 (commencement of the operating lease), and on…
A: Pine Corporation's Journal Entries 01-Jan-20 Right of use asset 57721.8 Lease…
Q: of six year
A: Explanation a)Annual lease payments=P1,200,000 Annual executory payments=P200,000 PV of an ordinary…
Q: On January 1, 2020, Edgar Company entered into a six-year lease with a lessor. Annual lease payments…
A: a)Annual lease payments=P1,200,000 Annual executory payments=P200,000 PV of an ordinary annuity of 1…
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: On January 1,2020, ABC Company leased its equipment to DEF Company under a 3 year operating lease at…
A: Lease rent include all fixed rent ,bouns and additional rent. Following is the ABC Company's rent…
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, 2018, ABC Company entered into a five-year non-renewable operating lease, commencing…
A: Rent receivable represents an asset for the company. It is required to be presented in the balance…
Q: Lewis Corporation entered into a lease agreement on January 1, 2020, to provide Dawkins Company with…
A: Requirement a: Describe the nature of a lease and evaluate the criteria to describe a nature of a…
Q: On January 1, 2019, Zendaya Corp. signed a five-year non-cancelable lease for machine with Cassie…
A: It is pertinent to note that lease liability includes all payments made on the lease discounted…
Q: Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…
A: A journal entry is the first step—and an essential function—of the accounting process. Journal…
Q: On January 1, 2021, Maroon Company entered into a five-year nonrenewable operating lease, commencing…
A: The operating lease is a lease agreement where the lessee takes the assets on rent from the lessor…
Q: Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…
A: PV Table for 9% Period Discount rate @9% 0 1 1 0.9174 2 0.8417 3 0.7722 4 0.7084 5…
Q: On January 1, 2020 Arab Company leases a machine from GMC Corp. with 8 years useful life. The lease…
A: On 01.01.2020, Arab company leases a machine from GMC corp. Useful life of machine = 8 years Lease…
Q: Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…
A: Journal Entry - It is a record of every business transaction in day-to-day life whether it is…
Q: Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…
A: Accumulated Depreciation: Accumulated depreciation is the combined devaluation of a resource to a…
Q: Cullumber Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020.…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: On January 1, 2021, the lessee company signs a 10-year, non-cancelable lease agreement to lease a…
A: Present value of lease payments = Annual lease payments * PVAD of $1 @10% for 10 periods + GRV *PV…
Q: The lessor company signs a lease agreement on December 31, 2020 to lease equipment to the lessee…
A: Given: The Time period of lease is 8 years Rental payment at the end of each year is $87000 (From…
Q: Sheridan Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6…
A: Calculation of Present value of Minimum lease payments/Lease liability Period Particulars…
Q: On 1 January 2020, the company entered into a lease agreement for a production equipment which has a…
A: The Initial lease liability is the present value of all lease payments at the lease commencement…
Q: Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not…
A: Solution:- Prepare the journal entry at commencement of the lease for Sharrer (1) Sharrer does not…
Q: On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of…
A: Net Investment in the lease Net investment in the lease is equal to sum of the present value of…
Q: The lessor company leases a building to the lessee company on 1/1/2021. The lessee will make ten…
A: Given, Annual Rental payment = 77,000 Residual Value = 17,000 Initial direct costs = 4,360
Q: Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020.…
A:
Q: On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s…
A:
Q: On 1 January 2020, Halwani Construction Company entered into a two-year lease for an excavator. The…
A: Lease liability refers to the obligation which is of financial nature against the payments required…
Q: What is the balance of lease liability on December 31, 2020?
A: Lease liability is an accounting term that refers to the financial obligation to make payments that…
Q: Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build…
A: The question is based on the concept of Lease Accounting.
Q: Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build…
A: The given lease should be classified as finance lease due to the following 2 reasons: There is a…
The lessor company signs a sales-type lease agreement on January 1, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $63,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $44,000. The lessor expects to earn a return of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.)
|
|
Future Value Single Sum |
Present Value Single Sum |
Future Value Ordinary Annuity |
Present Value Ordinary Annuity |
Present Value Annuity Due |
|
8%, 8 periods |
1.85 |
0.54 |
10.64 |
5.75 |
6.21 |
Step by step
Solved in 2 steps
- On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.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 March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
- 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.On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910Comprehensive 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.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 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 methodLessee 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.
