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Concept explainers
Classification as Finance or Operating Lease, Lessor,
Required
- a. Determine the lessor s classification of the lease.
- b. Measure the right-of-use asset and the lease liability at January 1, 2019 and prepare the lessee s amortization table
- c. Prepare the journal entries for Stewart Standard for 2019
E18-15 Classification as Finance or Operating Lease, Lessee, Lessor, Journal Entries, Sales-Type Lease, Discount Rates, Annuity Due, Nonlease Components. On January 1, 2019, Kane Kite Company leased a nonspecialized fabric-cutting machine from Stewart Standard, Inc. Under the terms of the lease Kane Kite must pay $200,000 on January 1 of each year, starting in 2019, over a 9-year term. The lease terms do not contain a transfer of ownership, and there is no purchase option. There is also no residual value specified in the contract. The cutting machine has a useful life of 9 years and Kane Kite
Required
- a. What type of lease is this for both the lessee and lessor?
- b. Prepare the lease amortization table for the lease term
- c. Prepare the journal entries necessary for Stewart Standard on January 1, 2019, and on December 31, 2019.
- d. Prepare the journal entries necessary for Kane Kite Company on January 1, 2019, and on December 31, 2019.
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Intermediate Accounting, Student Value Edition (2nd Edition)
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- On January 1, 2021, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $47,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison. Leasing at a cost of $367,000 and was expected to have a useful life of five years with no residual value. Both firms record. amortization and depreciation semi-annually. Required: Prepare the appropriate journal entries for the lessor (Jamison Leasing) from the beginning of the lease through the end of 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forwardTOPIC: LEASESa. Compute the Rent Expense reported in Faith Company's profit or loss for the yeaars ended December 31, 2020 and December 31, 2021, assuming that Faith elected to apply for this short-term lease the recognition and measurement exemptions under IFRS 16 Leases.b. Prepare journal entries for years 2020 and 2021 in the books of Faith Company and Love Corporation.arrow_forwardOn December 31, 2019, Skysong Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Skysong to make annual payments of $8,162 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,100 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Skysong uses the straight-line method of depreciation for all of its plant assets. Skysong's incremental borrowing rate is 9%, and the lessor's implicit rate is unknown. Click here to view factor tables. What type of lease is this? This is a/an lease. eTextbook and Media List of Accounts Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Present value of the lease payments eTextbook and Media List of Accountsarrow_forward
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- On January 1, 2019, Bridgeport Ic., a construction company, leased an excavator from Leaselt Inc. The lease terms are as follows: Annual lease payments of $26,900 at the beginning of each year for five years At the end of the lease term the asset reverts back to the lessor and the residual value guarantee is $8,100 The incremental borrowing rate is 7% and the implicit rate in the lease is 6% (known by the lessee) Bridgeport Inc. has a December 31 year end Prepare the journal entries for 2019 for Bridgeport Inc. Assume Bridgeport follow IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, e.g. 5,275. Round factor values to 5 decimal places, e.g. 1.25124. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)arrow_forwardThe following information is provided for an equipment leased by Lessee from Lessor. Lessee and Lessor both use IFRS. Inception Date of Lease Annual Lease Payment (Due: Beginning of Year, Starting Jan 1, 2020) Purchase option at of Lease Term (Certain to be exercised by Lessee) Lease Term Economic Life of Leased Equipment Lessor's Cost Fair Value of Asset Lessor's implicit rate Lessee's incremental borrowing rate Salvage value at the end of economic life) Select one: True O False Unearned Interest Income 30,858 ÷ January 01,2020 Sales 22,642 = 21,500 The lessor will most likely classify this as Sales Type Lease. Cost of Goods Sold 3,000 7 years 10 years Lessor will record the following at the beginning of the Lease term: Lease Receivable 122,642 ÷ 98,114 Same as present value of all future payments. 8%, known to Lessee Known to Lessee 7% 0 Timearrow_forward1. What amount should be reported as lease liability on December 31,2020? 2. What is the initial recognition of the right of use asset?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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