Concept explainers
Lessee; variable lease payments
• LO15–2, LO15–6
On January 1, 2018, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable lease payments equal to 3% of Taco King’s sales revenue, with a quarterly sales minimum of $400,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous 5-year period, Taco King has generated quarterly sales of over $650,000. Fogelman’s interest rate, known by Taco King, was 4%.
Required:
1. Prepare the
2. Prepare the journal entries for Taco King at April 1, 2018. First quarter sales were $660,000. Amortization is recorded quarterly.
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INTERMEDIATE ACCOUNTING +ACCLL
- 24 tes On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $677,829 over a 4-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $4.1 million. 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. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year…arrow_forward25 Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $19 million. This noncancelable lease had the following terms: • Lease payments: $3,287,947 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. • Lease term: 5 years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 9% semiannually. • Fair value of the computers on January 1, 2024: $23 million. . What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $17,698,200arrow_forwardProblem 5. Operating Lease- Lessor On January 1, 20x1, Lessor entered into an operating lease. Information follows: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to cover for Costs of administrative tasks Additional rent of 10% is to be paid for any excess of sales of Lessee over P1,000, 000. Lessee's sales for 20x1 are P1, 100, 000. The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual de preciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.arrow_forward
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- Brief Exercise 5-13 (Algo) Lease payment [LO5-10] On September 30, 2021, Ferguson Imports leased a warehouse. Terms of the lease require Ferguson to make 8 annual lease payments of $58,000 with the first payment due immediately. Accounting standards require the company to record a lease liability when recording this type of lease. Assume a 9% interest rate. What amount should Ferguson record the lease liability on September 30, 2021, before the first payment is made? (Round your final answers to nearest whole dollar amount.) Table or calculator function: Lease Payment: PV of Lease: Aw IMarrow_forwardProblem 4 On January 1, 2021, Twice Company entered into a lease agreement with the following: Floor space Annual rental payable at the end of each year Implicit rate in the lease 1,500 square meters 200,000 12% 12 years 6.1944 Lease term Present value of an ordinary annuity at 12% for 12 periods On January 1, 2024, the lessee and the lessor agreed to amend the original terms of the lease with the following information: Additional floor space Increase in rental payable at the end of each year Implicit rate in lease Present value of an ordinary annuity of 1 at 10% for 9 periods 2,000 square meters 300,000 10% 5.759 1. What amount should be reported as lease liability on January 1, 20217 2. What amount should be reported as additional lease liability on January 1, 2024? 3. What amount should be reported as total interest expense for 20247arrow_forward5 On January 1, 2024, Botosan Corporation leased equipment under a finance lease designed to earn the lessor a 11% rate of return for providing long- term financing. The lease agreement specified ten annual payments of $246,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $22,000 per year. Insurance premiums of $15,500 annually are related to the equipment. The lease agreement specified that both amounts were to be paid by the lessor and the lease payments reflect both expenditures. At what amount will Botosan record a right-of-use asset? Note: Round your answer to the nearest whole dollar amount. 01:20:13 Multiple Choice O $1,176,669 O $1,320,484 O $1,464,299 O $1,608,114arrow_forward
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