Question 19At the beginning of current year, Don RashedCompany sold a building with remaining life.of 20 years and immediately leased it back for5 years. Sales price is 20,000,000 for an18,000,000 fair value.Upon reviewing the books of Don Rashed,the carrying amount of the building per FS is10,800,000.The agreement consideration is 1500,000with an implicit interest rate of 12%.What is the cost of right of use of asset?

Name: Question 19At the beginning of current year, Don RashedCompany sold a
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Description: Question 19At the beginning of current year, Don RashedCompany sold a building with remaining life.of 20 years and immediately leased it back for5 years. Sales price is 20,000,000 for an18,000,000 fair value.Upon reviewing the books of Don Rashed,th

Given in the question: Sales Price 20,000,000 Fair Value 18,000,000 Carrying Amount…

Answered: What is the cost of right of use of…

Business

Accounting

What is the cost of right of use of asset?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 16DQ

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Question 5 Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required (Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing…
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24... Partially correct answer icon Your answer is partially correct. Larkspur, Inc. has entered an agreement to lease an old warehouse with a useful life of 5 years and a fair value of $20,000 from United Corporation. The agreement stipulates the following. ● Rental payments of $4,954 are to be made at the start of each year of the 5-year lease. No residual value is expected at the end of the lease. ● Larkspur must reimburse United each year for any real estate taxes incurred for the year. Last year, the cost of real estate taxes was $700, though these costs vary from year to year. ● Larkspur must make a payment of $500 with the rental payment each period to cover the insurance United has on the warehouse. ● Larkspur paid legal fees of $1,000 in executing the lease. Assuming Larkspur’s incremental borrowing rate is 12% and the rate implicit in the lease is unknown, prepare the journal entry to record the initial lease liability and…
31.. continue Marin, Inc. leases a piece of equipment to Bucks Company on January 1, 2020. The contract stipulates a lease term of 5 years, with equal annual rental payments of $7,367 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $40,000, a book value of $38,000, and a useful life of 8 years. At the end of the lease term, Marin expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Marin wants to earn a 6% return on the lease and collectibility of the lease payments is probable. Assume that the lease receivable is $40,000, deferred gross profit is $2,000, and the rate of return to amortize the net lease receivable to zero is 7.64%.Prepare Marin’ journal entry at the end of the first year of the lease to record the receipt of the first lease payment. (Credit account titles are automatically…
Problem 13NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000. NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000 Using the information above, what is the interest expense for 2019?2.A. None C. 330,000 B. 300,000 D. 630,000
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14 ABG bought a patent for €6,145. The patent is legally protected for a period of 10 years during which it is expected to generate a net cash flow of €1,000 per year. ABG has agreed with KLM to sell the patent at the beginning of the 8th year at its fair value. How will the amount of €6,145 be recognised and how will it be treated after initial recognition (the market interest rate is 10%)?What would differentiate your answer if ABG purchased the patent for (a) €7,000, (b) €5,000?
7...new...continue b Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…
Problem 11-2 On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at thend of each year 200,000 Annual rental the next three years payable at the end of each year 300,000 Initial direct cost paid by lease 100,000 Leasehold improvement 250,000 Present value of restoration cost required by contract 50,000 Useful life of building 20 years Implicit interest rate 8% Discount rate for the restoration cost 5% PV of an ordinary annuity of 1 at 8% for two periods 1.783 PV of an ordinary annuity of 1 at 8% for three periods 2.577 PV of 1 at 8% for two periods 0.857 Required: 1.…
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