When a lease qualifies as a finance lease, what amount is initially recorded as the cost of the right-of-use asset? A) The present value of the lease payments B) The sum of the gross (undiscounted) lease payments. O A

When a lease qualifies as a finance lease, what amount is initially recorded as the cost of the right-of-use asset? A) The present value of the lease payments B) The sum of the gross (undiscounted) lease payments. O A

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9E: Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8,...

See similar textbooks

Related questions

Q: 9.Hong Kong Clothiers reported revenue of $5,150,000 for its year ended December 31, 2021. Accounts ...

A: Formula: Cash collections from customers = December 31, 2021 revenue - December 31, 2021 receivables...

Q: Choose the letter of the correct answer: 1. What amount of allocated excess/purchase differential ...

A: Acquisition Differential is excess the fair value of acquisition entity over its recorded equity.

Q: Tristion Inc. has two production departments, and estimated the following information for the 2022 f...

A: overhead is said to be overassigned if the applied overhead is more than the actual overhead , if on...

Q: Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected th...

A: Solution: First we need to have carrying value on Dec 31, 22 by computing Premium amortized on Dec 3...

Q: 3. Mala-Prohibita Company has annual credit purchase of ₱720,000 with a usual term of 3/10, net 35. ...

A: The simple cost of foregoing the cash discount is computed following formula: - Cost = Discount Per...

Q: Journalize the payment of wages, and record the payroll taxes, assuming that the contribution of the...

A: Tax refers to the amount charged by the government on individuals, partnership firms, HUF’s or any c...

Q: a) In your own words, explain how do we account for service costs included within a contract to leas...

A: Disclaimer: “Since you have asked multiple question, we will solve the first question for you. If yo...

Q: Pleasant Heating & Cooling (PHC) Co. manufactures furnaces and air conditioners that are in great de...

A: The organization must identify performance obligations in the contract at the beginning of the contr...

Q: Required: 4. Using the high-low method, calculate Camp Rainbow's total fixed operating costs and var...

A: 4. Variable Operating cost per child = (Highest activity cost – Lowest activity cost)/(Highest activ...

Q: Question: Is ASIA PACIFIC engaged in banking? Give your reasons.

A: Banking refers to the business activity of safeguarding as well as accepting the money owned through...

Q: The firm is formed to purchase and operate a vehicle. The purpose of the vehicle is to operate a ta...

Q: Review the following independent auditors’ report: To the Board of Directors and Shareholders Comp...

A: GIVEN To the Board of Directors and Shareholders Company XYZ"We have audited the accompanying bala...

Q: 2. A company is contemplating whether to accept a new project which requires the following three typ...

A: Answer to Question: A relevant cost is those cost which have influence on the decision of decision m...

Q: South Korea Inc. has an equipment costing P700,000 with an estimated salvage value of P70,000 and an...

A: Depreciation means the loss in value of assets because of usage of assets , passage of time or chang...

Q: can be purchased by paying a down payment of P15 ents, the first installment to be after two years a...

A: Here, Interest Rate is 15% Compounded Semi-annually Details of First Option: Down Payment is P150,00...

Q: What if the company actually spent $95,000 on overhead costs? What causes a company to have overappl...

A: Solution Overhead refers to the ongoing cost to operate a business but excludes the direct cost asso...

Q: Herbert and Ireneo are partners sharing profits and losses in the ratio of 60 % and 40% , respective...

A: When a new partner is admitted into a partnership firm then the profit sharing ratio of the existing...

Q: Walang Kayo Company provided the following data: 12/31/2019 P 600,000 4,000,000 2,400,000 1,200,000 ...

A: As per Accrual concept every income and expense should be recognise in the books of accounts as and ...

Q: h of May is as follows: FICA Social Security tax rate at 6.2%, FICA Medicare tax rate at 1.45%, fede...

A: Journal Entry: Journal entry is the act of keeping records of transactions in an accounting journal....

Q: Problem #12: Profitability & Cost Analysis Car Deals Inc. has two divisions: New Cars and Used Cars....

Q: Calculate the breakeven point and contribution margin. Breakeven point Fixed cost Contribution margi...

A: Break even point = Fixed costs / Contribution margin per unit where, Contribution margin per unit = ...

Q: The following information applies to the MO’s Restaurant: ROE ...

A: Solution Current ratio = current asset / current liabilities . Working note -. Accounts receivable...

Q: 4. Estrada V. Escritor sells on terms 3/10, net 30. Total sales for the year are P2,539,130. Forty p...

A: The calculation of sales per day has been made as follows: Sales per day=Total salesNumber of days i...

Q: The expected income each year from the new shelving products is: Win Corporation is considering the ...

A: Answer) P 52,500 Answer) P 52,500 Calculation of income statement ...

Q: 5. Berman V. Parker is planning to borrow ₱10 Million from NBA Bank, which offers to lend the money ...

Q: Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the u...

A: Predetermined overhead rates are used to allocate the indirect cost. It can be allocated on the basi...

Q: more than 155 hours per month, he or she gets an additional "overtime" pay of $65.80

A: Aggregate plan is a planning done by Operations managers to make the most of the required production...

Q: Your company issued the following bond: Face amount 500,000 Maturity in years 10 Interest rate payab...

A: Note:- Since you have asked multiple questions, we will solve the first question for you. If you wan...

Q: you to go out to the warehouse and count merchandise inventory. He said that owner is coming for a m...

A: Merchandise inventory: Merchandise inventory refers to one that examines the value of the products ...

Q: A company is planning to undertake an investment project. The following data have been calculat two ...

A: Answer:- Static payback period: It is the duration that is required by any project to cover the init...

Q: Required: How much total overhead cost would be assigned to K425 and M67

A: Answer Activity Cost Pool K425 M67 Supporting direct labor $480 ($6 * 80) $3,000 ($6 * 500)...

Q: What annual deposit is required for 5 years to accumulate an amount of money with the same purchasin...

A: Answer) Calculation of amount of annual deposit required to accumulate P 1,000 after the end of 5 ye...

Q: Presented below is selected data from the financial statements of Vert, Inc. for the current and pri...

A: Vertical analysis: It is a method of analyzing the financial statement in which each item is shown a...

Q: Using the following information please prepare an income statement. Salary expenses - $10,000.00 R...

A: The income statement is an essential part of the financial statements of the company. It is prepared...

Q: Based on the following information, prepare a cost of goods manufactured statement. Material purchas...

A: Material used = Beginning material inventory + material purchases - Ending material inventory Cost o...

Q: j. Discount the total benefits received in the future and put into column. Use 12% as your discount ...

A: Given Table:

Q: Office supplies were P9,000 at the end of January and P11,400 at the end of February. During Februar...

A: Answer:- Supplies expense = Beginning balance + purchases - Ending balance

Q: Exercise 3.4 · Balance Sheet Based on the following information, prepare a balance sheet. Note: Some...

A: Financial statement means the statement including income statement , balance sheet , cash flow state...

Q: of the company's S10 par common stock at an option price of 530 per share. The market value of the t...

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for yo...

Q: IZ Corporation purchased land for $500,000. Later in the year, the company sold a different piece of...

A: Cash flow Statement is a aspect of financial statement that represents inflow and outflow of cash in...

Q: The capital accounts for the partnership of Luke and Mark at October 31, 2022 are as follows: Luke, ...

A: Answer) Under Bonus Method, total capital of the firm post admission of new partner will be equal to...

Q: hat does equivalent units of production (EUP) mean, and why is it necessary for it to be correct?

A: Equivalent units of production (EUP) is a managerial accounting computation that estimates the numbe...

Q: Mahal Mo Co. reported revenue of P3,100,000 in its accrual basis income statement for the year ended...

A: To calculate sales under cash basis from sales under accrual basis we will prepare account receivabl...

Q: Question 21 What is the January Sales Revenue related to Job 3? Question 21 optio...

A: Q21. Job 3: Sales revenue = Units sold × Sales value = 10,000×$50 = $500,000

Q: Required: i. Prepare the Statement of Profit or Loss and the Statement of Financial Position as at 3...

A: Statement of income shows all the income(s) earned by the organization. There are certain ways for c...

Q: At the beginning of year 1, ABC Company raises $80 million of equity and uses the proceeds to buy a ...

A: Under dividend discount model, all the future dividends of a company are discounted at required rate...

Q: After the closing entries have been posted, all temporary accounts should have ____. Select one: a...

A: Answer) The correct answer in the given question is (B) a Zero balance. Justification Temporary a...

Q: Marin Ltd. started the year with a balance owing from Stratford Inc. of $31,200. After several phone...

A: Journal entry refer to the first step in process of accounting which refer to recording of financial...

Q: On September 1, 2020, Kayo Na Consulting. began a service proprietorship with an initial investment ...

A: Under the cash basis method of accounting, the revenues as well as the expenses are recorded at the ...

Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

When a lease qualifies as a finance lease, what amount is initially recorded as the cost of the right-of-use asset?
A) The present value of the lease payments
B) The sum of the gross (undiscounted) lease payments.
O A
O B
« Previous
Next
Not saved
Submit Quiz

Expert Solution

Step 1

Solution

Concept

In case of finance lease , The initial cost of right of use asset include

Present value of lease liability

ADD : direct costs

ADD : estimated cost of dismantling

ADD : prepaid lease payments

LESS : lease incentives

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

At its inception, the lease term of Lease G is 65% of the estimated remaining economic life of the leased property. This lease contains a purchase option that is reasonably expected to be exercised. The lessee should record Lease G as: a. neither an asset nor a liability b. an asset but not a liability c. an expense d. an asset and a liability
Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor. a. There is no transfer of ownership at the end of the lease term. There is no bargain purchase option. The lease term is 60% of the economic life of the leased property. The present value of lease payments, including a residual value guaranteed by the lessee, is 100% of the fair value of the leased property to the lessor. The collectability of the lease payments is reasonably assured. The leased asset was not of a specialized nature. b. Same as (a), except that the residual value is guaranteed by a third party, not the lessee. The present value of the residual value guarantee is 15% of the fair value of the leased property. c. Same as (a), except that: the present value of the lease payments, including a residual value guaranteed by the lessee, is only 50% of the fair value of the leased asset. The collectability of the minimum lease payments is not predictable.
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.
Define each of the following terms: a. Lessee; lessor b. Operating lease; financial lease; sale-and-leaseback; combination lease; synthetic lease; SPE c. Offbalance sheet financing; capitalizing d. FASB Statement 13; ASU 2016-02 e. Guideline lease f. Residual value g. Lessees analysis; lessors analysis h. Net advantage to leasing (NAL) i. Alternative minimum tax (AMT)
The residual value is the estimated fair value of the leased property at the end of the lease term. a. Of what significance is (1) an unguaranteed and (2) a guaranteed residual value in the lessee's accounting for a finance lease transaction? b. Distinguish between lease payments used to determine lease classification compared to lease payments for measuring the lease liability.
Owefix a. compute the amount of lease receiveable for the leaseb. discusd the bethre of the leasec. prepara an amoritization table for the lessee and lessor
The lessee normally measures the lease liability to be recorded as the: Select one: a. Present value of the minimum lease payments. b. The future value of the minimum lease payments c. The fair market value of the leased asset. d. The sum of the cash payments over the term of the lease.
help me to answer the question with supporting computation. thank you 1. How much should malu record as an asset called right of use asset under present gaap, and a corresponding liability at the beginning of the lease? 2. Assume this time it is an operating lease insted of a capital/finance lease, how much right of use asset should malu record at the beginning of the lease?
The residual value is the estimated fair value of theleased property at the end of the lease term.(a) Of what significance is (1) an unguaranteed and (2) aguaranteed residual value in the lessee’s accountingfor a capitalized-lease transaction?(b) Of what significance is (1) an unguaranteed and (2) aguaranteed residual value in the lessor’s accountingfor a direct-financing lease transaction?
On the lessor’s accounting, which of the following situations would prima facie lead to a lease contract being classified as an operating lease? Lease term is for a major part of the asset’s useful life Existence of a bargain purchase option Present value of minimum lease payments is 50% of the fair value of the leased asset Transfer of ownership by end of lease term
When a lease transfers ownership to the lessee by the end of the lease term, the underlying asset is depreciated A. Over the useful life of the asset B. Over the lease term C. Over the useful life of the asset or lease term whichever is shorter D. Not depreciated
The appropriate valuation of an operating lease in the balance sheet of the lessee is? right of use asset present value of lease payments nil gross amount of lease payments