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Lessee and lessor; lessee guaranteed residual value
• LO15–2, LO15–6
On January 1, 2018, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Allied. The equipment cost Allied $956,000 and has an expected useful life of five years. Allied expects the residual value at December 31, 2022, will be $300,000. Negotiations led to the lessee guaranteeing a $340,000 residual value.
Equal payments under the finance/sales-type lease are $200,000 and are due on December 31 of each year with the first payment being made on December 31, 2018. Karrier is aware that Allied used a 5% interest rate when calculating lease payments.
Required:
- 1. Prepare the appropriate entries for both Karrier and Allied on January 1, 2018, to record the lease.
- 2. Prepare all appropriate entries for both Karrier and Allied on December 31, 2018, related to the lease.
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Chapter 15 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
- Exercise 15-27 (Algo) Lessee; lessee guaranteed residual value [LO15-2, 15-6) On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aque . The equipment cost Aque $420,045 and has an expected economic life of five years . Aque and Maywood expect the residual value at December 31, 2027 to be $57,000. • Negotiations led to Maywood guaranteeing a $80.500 residual value. Equal payments under the lease are $14,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Maywood is aware that Aqua used a 6% interest rate when calculating lease payments. Note: Use tables, Excel, or a financial calculator Ya$1. Pof31 EVA of $1. PVA of 55. EVAD of 51 and PVAD of 33 Required: 1.5 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024 related to the lease Note: If no entry is required…arrow_forwardes aw Exercise 15-27 (Algo) Lessee; lessee guaranteed residual value [LO15-2, 15-6] On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aqua. . The equipment cost Aqua $421,168 and has an expected economic life of five years. • Aqua and Maywood expect the residual value at December 31, 2027, to be $58,000. • Negotiations led to Maywood guaranteeing a $82,000 residual value. . Equal payments under the lease are $116,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. . Maywood is aware that Aqua used a 5% interest rate when calculating lease payments. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease.…arrow_forwardProblem 15-30 (Algo) Sale-leaseback [LO Appendix 15] To raise operating funds, North American Courier Corporation sold its building on January 1, 2024, to an insurance company for $508,000 and immediately leased the building back. • The lease is for a 10-year period ending December 31, 2033, at which time ownership of the building will revert to North American Courier. • The building has a carrying amount of $430,000 (original cost $1,060,000). • The lease requires North American to make payments of $89,908 to the insurance company each December 31. · 0 The building had a total original useful life of 30 years with no residual value and is being depreciated on a straight-line basis. The lease has an implicit rate of 12%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the appropriate entries for North American (a) on January 1, 2024, to record the transaction and (b) on December 31, 2024, to…arrow_forward
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- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
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