What amount should be recognized as annual lease rental payable in advance required to yleld the desired return?
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- Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual lease payments of $1,510, based on an interest rate of 8%, are to be made every December 31, beginning with December 31, 2016. Required Assume that the lease is treated as an operating lease. Will the value of the forklift appear on Koffmans balance sheet? What account will indicate that lease payments have been made? Assume that the lease is treated as a capital lease. Prepare any journal entries needed when the lease is signed. Explain why the value of the leased asset is not recorded at $6,040 (1,5104). Prepare the journal entry to record the first lease payment on December 31, 2016. Calculate the amount of depreciation expense for the year 2016. At what amount would the lease obligation be presented on the balance sheet as of December 31, 2016?Unearned Rent Revenue Mannion Property Management leases commercial properties and expects its clients to pay rent on a monthly basis. A new client signs a 4-year lease with a yearly rent of $420,000 and agrees to pay the first 6 months in advance. Required: Make the journal entry to record the following transactions. 1. The customers prepayment of 6 months' rent 2. The necessary adjusting entry after 1 month has passedProblem 3: ABC Co. leased a new machine from XXX Inc. on January 1, 20X1, under a lease with the following information: Lease term 10 years Annual rent payable at the end of each year P 80,000 Useful life of the machine 12 years Implicit interest rate 14% Lessee’s incremental borrowing rate 12% The annual rental payment includes P 6,000 to cover maintenance costs. The maintenance costs transfer services to ABC. The amount charged reflects the stand alone selling price of the maintenance services. Requirements: Provide the entries in 20X1 and 20X2. Determine the current and non-current portions of the lease liability on December 31, 20X1.
- PROBLEM 4 Sushi Co., a lessor of equipment, purchased a new equipment for ₱1,000,000 on December 31, 2020. The equipment was delivered the same day to Mooncake Co., the lessee. The following information relates to the lease transaction: The leased asset has an estimated useful life of seven years, which is also the lease term. At the expiration of the lease, the equipment will revert to Sushi, at which time it is expected to have a residual value of ₱120,000 (none of which is guaranteed). Sushi’s implicit interest rate is 12%. Mooncake’s incremental borrowing rate is 14% at December 31, 2020. Lease rentals consist of seven equal annual payments, the first of which was paid on December 31, 2020. Sushi properly accounts for this lease as a direct financing lease and as a finance lease by Mooncake. Both lessor and lessee are calendar year corporations and depreciate all property, plant and equipment on the straight-line basis. Questions: (Round off present value factors to 4 decimal…WITH SOLUTION/COMPUTATION 61. At the beginning of current year. An entity leased office space for five years at an annual rental of P700,000 under an operating lease. On the same date, the entity incurred the following amounts: Bonus to obtain lease 300,000 First year’s rent 700,000 Last year’s rent 700,000 Security deposit refundable at lease expiration 800,000 Installation of new walls and offices 750,000 Insurance 50,000 Property taxes 40,000 Initial direct cost 100,000 What total amount of the expenses relating to the rent of office space should be reported for the current year?a. 1,100,000b. 1,000,000c. 1,800,000d. 1,340,000(3)Company A rents a store from company B on 1.1.20X2. The duration of the lease is 5 years with the right to extend for another five years, while the annual lease is €18,000 for the first 5 years and €20,000 for the retention period. A paid the previous tenant €5,000 as well as €2,000 as brokerage fees to the real estate agents involved in the transaction. A judge at the commencement date of the lease that it is highly likely that it will not activate the right to extend. The marginal interest rate based on which the lessee could draw funds of the same amount as the right of use for the same duration and with similar collateral is 4%, while the present value of the 5 installments is €83,338.11 and the interest for the first year €2613.52. Journal entries are requested for the lessee's side for the year 20X2
- Question 3 On 30 June 2022, Happy Ltd purchased machinery for its fair value of $41 600 and then leased it to Laugh Ltd. Laugh Ltd incurred $220, and Happy Ltd incurred $797, in costs to negotiate the lease agreement. The machine is expected to have an economic life of 5 years, after which time it will have a residual value of $2500. The lease agreement details are as follows. Length of lease 4 years Commencement date 30 June 2022 Annual lease payment, payable 30 June each year commencing 30 June 2022 $12 000 Residual value at the end of the lease term $10 000 Residual value guarantee by lessee $8 000 Interest rate implicit in the lease 9% All insurance and maintenance costs are paid by Happy Ltd and amount to $2 000 per year and will be reimbursed by Laugh Ltd by being included in the annual lease payment of $12 000. The lease has been classified as a finance lease by Happy Ltd. The machinery will be depreciated on a straight-line basis. It is…Item4 Item 4 At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $32,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $73,596.) Crescent seeks a 9% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to the nearest whole dollar amount.) Required:1. What will be the effect of the lease on Café Med’s…1.) Victory Company signed a 6-year lease for a store space on January 1, 2017. The entity has an option to renew the lease for an additional 4-year period on or before January 1, 2020. During January 2019, the entity made substantial improvement to the store. The cost of the improvement was P1,080,000 with an estimated useful life of 10 years. On December 31, 2019, the entity intended to exercise the renewal option. The entity has taken a full year depreciation on this leasehold improvement for 2019. On December 31, 2019, what is the carrying amount of the leasehold improvement? * A. P810,000 B. P900,000 C. P945,000 D. P972,00 On September 1, 2020, SMD Company borrowed P5,000,000, 10% interest-bearing note due in five years. On December 31, 2020, the fair value of the note is determined to be P4,350,000. The entity elected irrevocably the fair value option in measuring the note payable. What amount of…
- 6. Rich Company leased equipment to Snead Company on July 1, 2033, for a one-year period expiring June 30, 2034, for P80,000 a month. On July 1, 2034, Rich leased this piece of equipment to Price Company for a three-year period expiring June 30, 2037, for P100,000 a month. The original cost of the equipment was P6,400,000. The equipment, which has been continually on lease since July 1, 2029, is being depreciated on a straight-line basis over an eight-year period with no salvage value. Assuming that both the lease to Snead and the lease to Price are appropriately recorded as operating leases for accounting purposes, what is the amount of income (expense) before income taxes that each would record as a result of the above facts for the year ended December 31, 2034? Rich Snead Price a. P1,080,000 P(80,000) P(200,000) b. P1,080,000 P(880,000) P(600,000) c. P280,000 P(480,000) P(600,000)…Exercise problem #3 On January 1, 2021, Wildhorse Corporation signed a 10-year noncancelable lease for certain machinery. The terms of the lease called for Wildhorse to make annual payments of $265000 at the end of each year for 10 years with the title passing to Wildhorse at the end of this period. The machinery has an estimated useful life of 15 years and no salvage value. Wildhorse uses the straight-line method of depreciation for all of its fixed assets. Wildhorse accordingly accounted for this lease transaction as a financial lease. The lease payments were determined to have a present value of $1861249 at an effective interest rate of 7%. With respect to this lease, Wildhorse should record for 2021 lease expense of $130287. interest expense of $130287 and amortization expense of $124083. interest expense of $124083 and amortization expense of $110750. interest expense of $116287 and amortization expense of $186125.Cassandra Company decides to enter the leasing business. The entity acquires a specialized packaging machine for P3,000,000 cash and leases it for a period of 6 years after which the machine is to be returned to Cassandra Company for disposition. The guaranteed residual value of the machine is P200,000. The lease term is arranged so that a return of 12% is earned by Cassandra Company. 1. What is the annual rental payable in advance required to yield the desired return?