INTERMEDIATE ACCOUNTING (ACCT 3200B)
10th Edition
ISBN: 9781307660647
Author: SPICELAND
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 15, Problem 15.6BE
Sales-type lease; lessor; income statement effects
• LO15–3
A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The lessor’s fiscal year is the calendar year. The lessor manufactured this asset at a cost of $125,000. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
E 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%
$185,000
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
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
Chapter 15 Solutions
INTERMEDIATE ACCOUNTING (ACCT 3200B)
Ch. 15 - Prob. 15.2QCh. 15 - Prob. 15.3QCh. 15 - Prob. 15.4QCh. 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. 15.21QCh. 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. 15.26QCh. 15 - Prob. 15.27QCh. 15 - Prob. 15.28QCh. 15 - When a company sells an asset and simultaneously...Ch. 15 - Prob. 15.30QCh. 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 - Lease classification LO151 Each of the four...Ch. 15 - Prob. 15.9ECh. 15 - Lessor calculation of annual lease payments;...Ch. 15 - Sales-type lease; lessor; income statement effects...Ch. 15 - Calculation of annual lease payments; residual...Ch. 15 - Lease concepts; finance/sales-type leases;...Ch. 15 - Calculation of annual lease payments; purchase...Ch. 15 - Prob. 15.37ECh. 15 - Prob. 15.38ECh. 15 - Prob. 15.39ECh. 15 - Lessors initial direct costs; operating and...Ch. 15 - Research Case 151 FASB codification; locate and...Ch. 15 - Ethics Case 153 Leasehold improvements LO153...Ch. 15 - Communication Case 155 Wheres the gain? Appendix...Ch. 15 - Prob. 15.6DMPCh. 15 - Prob. 1CCTCCh. 15 - Prob. 2CCTC
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
- E 15-26 Lease concepts; finance/sales- type leases; guaranteed and unguaranteed residual value LO15-2, LO15-6 Each of the four independent situations below describes a sales-type lease in which annual lease payments of $100,000 are payable at the beginning of each year. Each is a finance lease for the lessee. Determine the following amounts at the beginning of the lease: A. The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease liability Lease term (years) Lessor's and lessee's interest rate Residual value: Estimated fair value Guaranteed by lessee 1 7 9% 0 0 Situation 2 7 11% $50,000 0 3 8 10% 4 8 12% $8,000 $50,000 $8,000 $60,000arrow_forwardExercise 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 15-9 (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_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. (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_forwardProblem 15-9 (Algo) Lease concepts; sales-type leases; guaranteed and unguaranteed residual value [LO15-2, 15-6] Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: eaved Each of the four independent situations below describes a sales-type lease in which annual lease payments of $16,000 are payable at the beginning of each year. Each is a finance lease for the lessee. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Guaranteed by lessee. Unguaranteed Purchase option: After (years) Exercise price. Reasonably certain? 1 4 4 11% e e none n/a n/a Situation 2 4 5 11% $ 6,400 0 www www 3 $8,200 no 3 4 5 11% $3,200 $3,200 $2,200 no Next 4 4 7 11% Save & Exit Submit 8 $.6,400 $4,200 yes Activate Windowsarrow_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_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) 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_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_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 1 $ $ $ $ 6 10% $ 58,000 $ 58,000 0 10 10 5,000 0 0 2 Residual Value PV of Lease Guarantee Payments Situation $ 358,000 $ 358,000 9 11% $ 58,000 0 $ $ $ 3 $ 83,000 $ 53,000 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…arrow_forward
- 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 $225,000arrow_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 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 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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
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