Zinc Co. leased equipment from Helium Company on July 1, 2018 for an 8- year period expiring June 30, 2026. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2018. The rate of interest contemplated by Zinc and Helium is 10%. The cash selling price of the equipment is P3,520,000 and the cost of the equipment on Helium's accounting records is P2,800,000. The lease is appropriately recorded as sales-type lease. What is the amount of interest revenue that Helium should record for the year ended December 31, 2018?
Q: On January 1, 2020, Eddie Company entered into a five-year finance lease for an equipment. Eddie…
A: Lease is a form of contract or arrangement between two parties under which one party provides it's…
Q: East Company leased a new machine from North Company on January 1, 2021 under a lease with the…
A: So East Company has leased Machine from North Company on Jan1, 2021 - This is a Finance Lease Type…
Q: On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year…
A: Lease is an agreement or association between two parties in which one party provides its asset for…
Q: Phil Co. leased equipment to MNL Corp. on January 1, 2014 for an 8-year period expiring Dec. 31,…
A: Sales-lease type: It is the type of lease in which the lessor considers the lease transactions as…
Q: Fox Company, a dealer in machinery and equipment, leased equipment to Tiger Inc. on July 1, 2019.…
A: Lease accounting refers to the accounting for lease agreement both in the books of lessor and lessee…
Q: ABC Ltd executes a five-year lease agreement with Legal Ltd for a piece of machinery on July I,…
A: Accounting is the process of defining, evaluating, and reporting transactions to regulatory…
Q: On January 1, 2020, MCU Company sold an equipment with carrying amount of P6,000,000 and a remaining…
A: Sale and lease back is a transaction where an entity first sells it asset to another entity and then…
Q: Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year perlðd…
A: Solution 1: Solution 1: Annual Lease payment 36000 *PVA $1 @12% for 3 periods 2.69005…
Q: On April 1, 2021, Xai Company acquired a machine by signing a four-year lease. Annual rentals of…
A: Depreciation is calculated based on the useful life In case of lease, the useful life of the leased…
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: Water Co. leased machine from Air Co. on July 1, 2018 for an 8-year period expiring June 30, 2026.…
A: Computation:
Q: Anthony Incorporated leases a piece of machinery to Irving Company on January 1, 2020, under the…
A: a.Leases is a contract by which one party conveys land, property, services, etc. to another for a…
Q: Kizaru Company leased equipment to Fujitora Company on January 1, 2020 for an eight-year period…
A: Lease liability is recognized at cash selling price and the ROU asset is the sum of lease liability…
Q: Maya Company leased equipment from Waya Company on July 1, 2020 for an eight -year period expiring…
A: Present value of lease payments: Present value of all lease payments = P3,520,000 (which is equal…
Q: On January 1, 2022, Cage Company contracts to lease equipment for 5 years, agreeing to make a…
A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: Meg Company leased equipment from Wee Company on July 1, 2021 for an eight-year period expiring June…
A: Under sales type lease, selling profit or loss is = Fair Value of the underlying asset - Carrying…
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: Kennon Technologies, a dealer of machinery and equipment, leased equipment to Marcos Co. on July 1,…
A:
Q: ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period expiring June 30,…
A: ABC would record 2 revenues in the year ended December 31, 2020, namely Sales Revenue on the date of…
Q: Cullumber Incorporated leases a piece of machinery to Bramble Company on January 1, 2020, under the…
A: As per the given information, the lease of the equipment is as follows: This is a capital lease for…
Q: Water Co. leased machine from Air Co. on July 1, 2018 for an 8-year period expiring June 30, 2026.…
A: The cash selling price is the actual sales price of the asset and the interest shall be charged on…
Q: On April 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals of…
A: Carrying amount of the machine::P62,45,450..... Salvage value :::P6,00,000.. Expense under Straight…
Q: (1) Prepare the journal entries needed to record the lease on Sandiago's books (2) How much interest…
A: Sale of asset 1. Bank Dr. 102,690,000 To Machinery 94,000,000…
Q: Fox Company, a dealer in machinery and equipment, leased equipment to Tiger Inc. on July 1, 2019.…
A: Lease is an agreement or contract between two parties in which one party provides its asset for use…
Q: Debbink Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years,…
A: Calculate fair value of asset:
Q: ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period expiring June 30,…
A: Present Value of Lease receivables on July 1, 2020 = (Annual lease payment x Present value factor…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: All amounts are in dollar.
Q: On December 31, 2021, Maroon Co. leased an equipment with a cot of P2,000,000 to Green Co. for 5…
A:
Q: a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant…
A: Leasee Magnitude Ltd Term of Lease 3 years Use full life of Plant 7 years Lease Rental…
Q: On Dec.31, 2021, Splinter Company leased equipment from Land Company with the following date: - The…
A: In accordance with PFRS, upon initial measurement an asset is measured at cost which consists of the…
Q: eight years and payments are required at the beginning of each year. The following information…
A: A) the lease is a direct-financing type lease from the lessor's point of view or a capital lease…
Q: Metro Company, a dealer in machinery and equipment, leased equipment to Sands, Inc. on July 1, 2015.…
A: Lease accounting is the process by which a company records the financial effects of its leasing…
Q: Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period…
A: Discount factor = present value of the equipment / Annual lease payment = P3,520,000 /P600,000 =…
Q: On January 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals of…
A: Loss on unexercised bargain purchase = Carrying amount of the machinery (leased asset) - Bargain…
Q: On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year…
A: A lease is a written agreement that indicating the conditions within which a lessor acknowledges to…
Q: ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period expiring June 30,…
A: Present Value of Lease receivables on July 1, 2020 = (Annual lease payment x Present value factor…
Q: Rayleigh Company had an asset costing P 5,239,000. The asset was leased on January 1, 2020 to…
A: A lease is a contract between the parties that provides the right to use the asset for an agreed…
Q: On December 31, 2018 Corral Company enters into a five-year lease agreement with Island Company…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: On January 1, 2022, Edward Corporation (lessor) enters into a ten-year lease of equipment to Kirk…
A: In lease accounting, interest income that is to be recognized by lessor in its financial statement =…
Q: Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period…
A: Gross profit from this sale at the inception of the lease = cash selling price of the equipment -…
Q: Haystack, Inc. manufactures machinery used in the mining industry. On January 2, 2018, it leased…
A: Here, Cost of the equipment = £480,000 Selling price of the equipment = £702,000 Interest rate =…
Q: On April 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals of…
A: If if the cost of ROU asset reflects that the lessee will exercise the purchase option, then the ROU…
Q: On January 1, 2020, Cage Company contracts to lease equipment for 5 years, agreeing to make a…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020.…
A:
Q: Abhijit Co. leased equipment from Barua Corp. on July 1, 2018, for an 8-year period expiring June…
A: Introduction: A corporation can generate interest revenue in two ways: by lending money or by…
Q: On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s…
A:
Q: urn of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020?…
A: Calculation of amount sales the lessar will record on jan .1.2020 = (Present value of rental…
Q: July 1, 2019, of the rent payments over the lease term, discounted at 12% (the appropriate interest…
A: Lease is an agreement or contract between two parties in which one party provides its asset for use…
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…
Zinc Co. leased equipment from Helium Company on July 1, 2018 for an 8-
year period expiring June 30, 2026. Equal payments under the lease are
P600,000 and are due on July 1 of each year. The first payment was made
on July 1, 2018. The rate of interest contemplated by Zinc and Helium is
10%. The cash selling price of the equipment is P3,520,000 and the cost of
the equipment on Helium's accounting records is P2,800,000. The lease is
appropriately recorded as sales-type lease. What is the amount of interest
revenue that Helium should record for the year ended December 31, 2018?
Step by step
Solved in 2 steps
- 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. 47,910On 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.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.
- 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 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 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.
- On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000Lessee 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.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.
- 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.)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.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.