Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 18, Problem 18.2BE
Classification as Finance or Operating Lease, Lessee. Dial Digital Solutions signed a 3-year lease at the beginning of the current year. The leased equipment has an economic life of 5 years and a fair value of $1.450. Under the terms of the lease, Dial is required to pay $500 on January 1 of each year. There is no purchase option, and Dial must return the equipment at the end of the lease term. Dial does not know the lessor’s implicit rate but recently borrowed at 5% under a 3-year loan agreement. Should Dial account for this lease as an operating or a finance lease?
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Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
there are 6 entries
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
CHART OF ACCOUNTS
Keller Corporation
General Ledger
ASSETS
111
Cash
121
Accounts Receivable
141…
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
X
Chart of Accounts
CHART OF ACCOUNTS
Keller Corporation
General Ledger
ASSETS
111…
Chapter 18 Solutions
Intermediate Accounting
Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2QCh. 18 - Prob. 18.3QCh. 18 - Prob. 18.4QCh. 18 - Prob. 18.5QCh. 18 - Prob. 18.6QCh. 18 - Prob. 18.7QCh. 18 - Prob. 18.8QCh. 18 - Prob. 18.9QCh. 18 - Prob. 18.10Q
Ch. 18 - Prob. 18.11QCh. 18 - Prob. 18.12QCh. 18 - Prob. 18.13QCh. 18 - Prob. 18.14QCh. 18 - Prob. 18.15QCh. 18 - Prob. 18.16QCh. 18 - Prob. 18.17QCh. 18 - Prob. 18.18QCh. 18 - Prob. 18.19QCh. 18 - Prob. 18.20QCh. 18 - Prob. 18.21QCh. 18 - Prob. 18.22QCh. 18 - Prob. 18.23QCh. 18 - Prob. 18.24QCh. 18 - Prob. 18.1MCCh. 18 - Prob. 18.2MCCh. 18 - Prob. 18.3MCCh. 18 - Prob. 18.4MCCh. 18 - Prob. 18.5MCCh. 18 - Prob. 18.6MCCh. 18 - Prob. 18.7MCCh. 18 - Prob. 18.8MCCh. 18 - Prob. 18.1BECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.4BECh. 18 - Prob. 18.5BECh. 18 - Prob. 18.6BECh. 18 - Prob. 18.7BECh. 18 - Prob. 18.8BECh. 18 - Prob. 18.9BECh. 18 - Finance Lease, Lessee, Lessor, Guaranteed Residual...Ch. 18 - Prob. 18.1ECh. 18 - Prob. 18.2ECh. 18 - Prob. 18.3ECh. 18 - Prob. 18.4ECh. 18 - Prob. 18.5ECh. 18 - Prob. 18.6ECh. 18 - Prob. 18.7ECh. 18 - Prob. 18.8ECh. 18 - Prob. 18.9ECh. 18 - Prob. 18.10ECh. 18 - Prob. 18.11ECh. 18 - Prob. 18.12ECh. 18 - Prob. 18.13ECh. 18 - Prob. 18.4PCh. 18 - Prob. 18.5PCh. 18 - Prob. 18.1PCh. 18 - Prob. 18.2PCh. 18 - Prob. 18.3PCh. 18 - Prob. 18.6PCh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 2JCCh. 18 - Prob. 1FSACCh. 18 - Prob. 1SSCCh. 18 - Prob. 1BCC
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