INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 15, Problem 15.3BE
Lessee and lessor; calculate interest; finance/sales-type lease
• LO15–2
A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment on October 1? What would be the amount of interest revenue the lessor would record in conjunction with the second quarterly payment on October 1?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Question 5
The following facts pertain to a noncancelable lease agreement
between Mooney Leasing Company and Rode Company, a lessee.
Inception date: May 1, 2025
Annual lease payment due at the beginning of each year, beginning with May 1,
2025: $30,000
Bargain-purchase option price at end of lease term = $10,000
Lessor's implicit rate = 7%
The lease term ends in FIVE years on April 30, 2030.
What is the present value of the asset being leased?
Recommendation: draw a timeline of the cash flows from the lessee to the lessor.
Your Answer:
Answer
Exercise 15-9 (Algo) Lessor calculation of annual lease payments; lessee calculation of asset and liability
[LO15-2]
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the
beginning of each year. The lessee is aware of the lessor's implicit rate of return.
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)
Lease term (years)
Lessor's rate of return (known by lessee)
Lessee's incremental borrowing rate
Fair value of lease asset
Situation 1
Situation 2
Situation 3
Lease Payments
Right-of-use Asset/Lease
1
Payable
10
10%
11%
$790,000
Situation
2
20
8%
9%
Required:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a
right-of-use asset and a lease liability, for each of the above situations.
Note: Round your answers to the nearest whole dollar.
$1,170,000
5
11%
10%
$375,000
Exercise 15-10 (Algo) Lessor calculation of annual lease payments; lessee calculation of asset and
llability [LO15-2]
Each of the three Independent situations below describes a finance lease in which annual lease payments are payable at the end of
each year. The lessee is aware of the lessor's implicit rate of return.
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)
Lease term (years)
Lessor's rate of return (known by lessee)
Lessee's incremental borrowing rate
Fair value of lease asset
Situation 1
Situation 2
Situation 3
1
Lease Payments
10
10%
11%
$680,000
Situation
2
20
8%
9%
$1,020,000
6
11%
18%
Required:
a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a
right-of-use asset and a lease liability, for each of the above situations.
Note: Round your answers to the nearest whole dollar.
Right-of-use Asset/Lease
Payable
$225,000
Chapter 15 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 15 - Prob. 15.1QCh. 15 - Prob. 15.2QCh. 15 - Prob. 15.3QCh. 15 - A lessee should classify a lease transaction as a...Ch. 15 - Lukawitz Industries leased non-specialized...Ch. 15 - In accounting for a finance lease/sales-type...Ch. 15 - What is selling profit on a sales-type lease? How...Ch. 15 - At the beginning of an operating lease, the lessee...Ch. 15 - At the beginning of an operating lease, the lessor...Ch. 15 - In accounting for an operating lease, how are the...
Ch. 15 - Briefly describe the conceptual basis for asset...Ch. 15 - In a financing lease, front loading of lease...Ch. 15 - The discount rate influences virtually every...Ch. 15 - A lease that has a lease term (including any...Ch. 15 - A lease might specify that lease payments may be...Ch. 15 - What is a purchase option? How does it affect...Ch. 15 - A six-year lease can be renewed for two additional...Ch. 15 - Culinary Creations leased kitchen equipment under...Ch. 15 - What situations cause us to remeasure a lease...Ch. 15 - Prob. 15.20QCh. 15 - Compare the way a purchase option that is...Ch. 15 - What nonlease costs might be included as part of...Ch. 15 - The lessors initial direct costs often are...Ch. 15 - When are initial direct costs recognized in an...Ch. 15 - Prob. 15.25QCh. 15 - Prob. 15.26QCh. 15 - Prob. 15.27QCh. 15 - When a company sells an asset and simultaneously...Ch. 15 - Prob. 15.29QCh. 15 - Lease classification LO151 (Note: Brief Exercises...Ch. 15 - Lease classification LO151, LO152 Corinth Co....Ch. 15 - Lessee and lessor; calculate interest;...Ch. 15 - Finance lease; lessee; balance sheet effects ...Ch. 15 - Finance lease; lessee; income statement effects ...Ch. 15 - Sales-type lease; lessor; income statement effects...Ch. 15 - Prob. 15.7BECh. 15 - Operating lease LO154 (Note: Brief Exercises 8...Ch. 15 - Operating lease LO154 At the beginning of its...Ch. 15 - Short-term lease LO155 King Cones leased ice...Ch. 15 - Uncertain lease term LO156 Java Hut leased a...Ch. 15 - Uncertain lease payments LO156 On January 1,...Ch. 15 - Purchase option; lessor; sales-type lease LO152,...Ch. 15 - Residual value; sales-type lease LO152, LO153,...Ch. 15 - Guarantee d residual value LO156 On January 1,...Ch. 15 - Lessors initial direct costs; sales-type lease ...Ch. 15 - Nonlease payments LO152, LO157 On January 1,...Ch. 15 - Lease classification LO151 Each of the four...Ch. 15 - Finance lease; calculate lease payments LO152...Ch. 15 - Finance lease; lessee; balance sheet and income...Ch. 15 - Prob. 15.4ECh. 15 - Sales-type lease; lessor; balance sheet and income...Ch. 15 - Finance lease; lessee LO152 (Note: Exercises 6,...Ch. 15 - Sales-type lease with no selling profit; lessor ...Ch. 15 - Sales-type lease with selling profit; lessor;...Ch. 15 - Prob. 15.9ECh. 15 - Lessor calculation of annual lease payments;...Ch. 15 - Lessee and lessor; sales-type lease with selling...Ch. 15 - Lessee; finance lease; effect on financial...Ch. 15 - Lessee; operating lease; effect on financial...Ch. 15 - Lessor; operating lease; effect on financial...Ch. 15 - Sales-type lease; lessor; income statement effects...Ch. 15 - Lessee; operating lease LO154 Grichuk Power...Ch. 15 - Lessee a nd lessor; operating lease LO154 On...Ch. 15 - Short-term lease LO155 Chance Enterprises leased...Ch. 15 - Lessee; renewal option LO152, LO156 Natick...Ch. 15 - Variable lease payments LO152, LO156 On January...Ch. 15 - Lessee; variable lease payments LO152, LO156 On...Ch. 15 - Lessee; variable lease payments LO152, LO156 On...Ch. 15 - Lessee; renewal options LO152, LO156 On January...Ch. 15 - Calculation of annual lease payments; residual...Ch. 15 - Lessor; sales-type lease; residual value effect on...Ch. 15 - Lease concepts; finance/sales-type leases;...Ch. 15 - Lessee; lessee guaranteed residual value LO152,...Ch. 15 - Calculation of annual lease payments; purchase...Ch. 15 - Finance lease; purchase options; lessee LO152,...Ch. 15 - Purchase option; lessor; sales-type lease; no...Ch. 15 - Nonlease payments; lessor and lessee LO152, LO157...Ch. 15 - Lessors initial direct costs; sales-type lease ...Ch. 15 - Lessors initial direct costs; sales-type lease ...Ch. 15 - Lessors initial direct costs; operating lease ...Ch. 15 - Prob. 15.35ECh. 15 - Prob. 15.36ECh. 15 - Prob. 15.37ECh. 15 - Sale-leaseback Appendix 15 To raise operating...Ch. 15 - Sale-leaseback; operating lease Appendix 15 To...Ch. 15 - Prob. 15.1PCh. 15 - Finance lease LO152 At the beginning of 2018, VHF...Ch. 15 - Lease amortization schedule LO152 On January 1,...Ch. 15 - Finance /sales-type lease; lessee and lessor ...Ch. 15 - Lessee; operating lease; advance payment;...Ch. 15 - Operating lease; scheduled rent increases LO154...Ch. 15 - Lease amortization schedule LO152, LO156 On...Ch. 15 - Reassessment of lease term LO152, LO154, LO156 On...Ch. 15 - Lease concepts; sales-type leases; guaranteed and...Ch. 15 - Prob. 15.10PCh. 15 - Change in lease term; operating lease; lessor ...Ch. 15 - Lessee; renewal option LO152, LO156 High Time...Ch. 15 - Lessee and lessor; lessee guaranteed residual...Ch. 15 - Lessee and lessor; lessor; sales-type lease with...Ch. 15 - Nonlease payments; lessor and lessee LO152, LO157...Ch. 15 - Lessors initial direct costs; operating and...Ch. 15 - Nonlease costs; lessor and lessee LO152, LO157...Ch. 15 - Lessee-guaranteed residual value; unguaranteed...Ch. 15 - Initial direct costs; sales-type lease LO152,...Ch. 15 - Initial dire ct costs; sales-type lease with a...Ch. 15 - Guaranteed residual value; sales-type lease ...Ch. 15 - Unguaranteed residual value; nonlease payments;...Ch. 15 - Purchase option reasonably certain to be exercised...Ch. 15 - Lessee and lessor; lessee guaranteed residual...Ch. 15 - Prob. 15.25PCh. 15 - Prob. 15.26PCh. 15 - Modification of a lease LO152, LO153, LO156 On...Ch. 15 - Finance lease; lessee; financial statement effects...Ch. 15 - Prob. 15.29PCh. 15 - Sales-type lease; lessor; financial statement...Ch. 15 - Prob. 15.31PCh. 15 - Research Case 151 FASB codification; locate and...Ch. 15 - Ethics Case 153 Leasehold improvements LO153...Ch. 15 - Analysis Case 154 Lease concepts; Walmart LO151...Ch. 15 - Communication Case 155 Wheres the gain? Appendix...Ch. 15 - Prob. 15.7BYPCh. 15 - Prob. 1CCTCCh. 15 - Prob. 1CCIFRS
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
- Exercise 15-9 (Algo) Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-2] Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Situation 1 2 3 Lease term (years) 11 21 4 Lessor's rate of return (known by lessee) 10% 8% 11% Lessee's incremental borrowing rate 11% 9% 10% Fair value of lease asset $800,000 $1,180,000 $385,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar.arrow_forwardPROBLEM 8: Lease agreement with VARIABLE PAYMENTS Li Zi Company entered into a lease of building on January 1, 2020. The lease contract provided the following information: Lease term 10 years Estimated useful life of leased asset 12 years Annual rental payable at end of each year for the first 5 years 400,000 Annual rental payable at end of each year for the next first 5 years 550,000 Interest rate implicit in the lease 10% No purchase option nor transfer of title REQUIRED: Prepare table of amortization and journal entries for the entire lease term.arrow_forwardExercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Situation 2 B 4 Lease term (years) Lessor's rate of return Fair value of lease asset 5 10% 8 11% 6 9% 9 12% $ 57,000 Lessor's cost of lease asset $ 57,000 $ 357,000 $ 357,000 $ 82,000 $ 52,000 $ 472,000 $ 472,000 Residual value: Estimated fair value 0 $ 57,000 $ 14,000 $ 29,000 Guaranteed fair value 0 $ 14,000 $ 34,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest…arrow_forward
- Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2 3 4 $44,000 Mo Beginning of year 5% 5x Lease Classification 4 Situation $45,000 Yes End of year 60% 5% 3 4 6 $41,000 Required: Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation, determine the appropriate lease classification by the lessee. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) No Beginning of year 5% 5% $38,000 No End of year 6%arrow_forwardExercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value. Situation 1 Situation 2 Situation 3 Situation 4 Lease Payments $ 70,000 $ 70,000 4 10% Residual Value Guarantee 0 0 $ 2 7 11% $ 370,000 $ 370,000 PV of Lease Payments $ 70,000 0 Situation 70,000 $ $ GA 3 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations.…arrow_forwardExercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value Situation 1 Situation 2 Situation 3 Situation 4 1 Lease Payments 10% $ 53,000 $ 53,000 0 0 2 Situation 8 11% $ 353,000 $ 353,000 Residual Value PV of Lease Guarantee Payments $ 53,000 0 3 6 9% $ 78,000 $ 48,000 $ 10,000 $ 10,000 PV of Residual Value Guarantee 4 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and…arrow_forward
- Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Situation 1 2 3 4 Lease term (years) Lessor's rate of return 6 10% 9 11% 7 9% 10 12% Fair value of lease asset $ 58,000 $ 358,000 $ 83,000 Lessor's cost of lease asset $ 58,000 $ 358,000 $ 53,000 $ 473,000 $ 473,000 Residual value: Estimated fair value 0 $ 58,000 $ 15,000 $ 30,000 Guaranteed fair value 0 0 $ 15,000 $ 35,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest…arrow_forwardExercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Situation 1 2 3 4 Lease term (years) Lessor's rate of return Fair value of lease asset 5 10% 8 11% 6 9% 9 12% $ 57,000 $ 357,000 Lessor's cost of lease asset $ 57,000 $ 357,000 $ 82,000 $ 52,000 $ 472,000 $ 472,000 0 $ 57,000 $ 14,000 $ 29,000 e 0 $ 14,000 $ 34,000 Residual value: Estimated fair value Guaranteed fair value Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest…arrow_forwardHi, Please help to determine present value of lease payments (lessee) considering the following: Project 2.2 Topic: Leases Part 2 Illini leases another piece of equipment from Cubs Corporation under a four-year lease agreement on 1/1/20x1. The lease specifies annual payments on each 1/1 and the first payment of $10,000 is made on 1/1/20x1. The lease also specifies a 3% annual increase in the lease payments. The equipment has a fair value of $100,000 on 1/1/20x1. The expected useful life of the equipment is 10 years with no residual value. The equipment will be returned to Cubs at the end of the lease term. The implicit rate is 10%. Project 2.2 Part 2 Ledger Date Account Name Debit Credit 1/1/20x1 ROU assets [A] Lease obligation [B]arrow_forward
- Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the begin of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value. Guaranteed fair value Situation 1 Situation 2 Situation 3 Situation 4 Lease Payments $ $ 13,907 2,404,814 1 $ $ $ 6 9% $ 68,000 $ 68,000 0 0 $ 0 0 2 Residual Value PV of Lease Guarantee Payments Situation $368,000 $368,000 9 10% $ 68,000 0 68,000 $ 339,161 $ $ 3 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record a right-of-use asset and a lease liability, for…arrow_forwardE 15-9 Lessor calculation of annual lease payments; lessee calculation of asset and liability LO15-2 Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset 1 10 11% 12% $600,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a right-of-use asset and a lease liability. Situation 2 20 9% 10% $980,000 3 4 12% 10% $185,000arrow_forwardQ25 Chad Ltd negotiated a lease on the following terms: the term of the lease was 5 years; the estimated useful life of the leased equipment was 10 years; the purchase price was R60 000; and the annual lease payment was R5 000. This lease should be classified as_____. Select one: a. A finance lease b. neither operating nor finance lease c. An operating lease d. a financial leasearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781285867977Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License