Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134833118
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 18, Problem 18.7MC
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I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first annual payment was made on January 01, 2020. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. At the end of the lease term, the machine will be returned to ANYARE SA COLLEGE LTD. and I MISS HIGH SCHOOL INC. guarantees a residual value of P5,000. Interest implicit in the lease is 10% which is known to I MISS HIGH SCHOOL INC. For the year ended December 31, 2020, what would I MISS HIGH SCHOOL INC. record in relation to the lease? Round present value factors to five decimal places.
Use the same information in MC 30. How much annual depreciation expense should I MISS HIGH SCHOOL INC. record?
a. P24,628
b. P16,419
c. P23,378
d. P15,585
I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first annual payment was made on January 01, 2020. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. At the end of the lease term, the machine will be returned to ANYARE SA COLLEGE LTD. and I MISS HIGH SCHOOL INC. guarantees a residual value of P5,000. Interest implicit in the lease is 10% which is known to I MISS HIGH SCHOOL INC. For the year ended December 31, 2020, what would I MISS HIGH SCHOOL INC. record in relation to the lease? Round present value factors to five decimal places.
a. An interest expense of P9,851.
b. An interest expense of P0.
c. An interest payable of P9,851.
d. An interest payable of P7,836.
Telor, a private company that follows ASPE, entered into a lease agreement with Global Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Telor signed the lease agreement on January 1, 2021, and made the first payment on that date.
At the end of the lease, the machine will revert back to Global Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Telor does not know the implicit rate of the lease; Telor's incremental borrowing rate is 10%. Telor uses straight-line depreciation for this type of asset.
Required:
Using the three criteria under ASPE, prove whether this is an operating or capital lease.
Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar.
Prepare the journal entries for 2021 and 2022 for Telor. Round amounts to the nearest dollar.
Chapter 18 Solutions
Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)
Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2QCh. 18 - Prob. 18.3QCh. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6QCh. 18 - How is the right-of-use asset measured?Ch. 18 - What components are included in a lease contract?Ch. 18 - How does a lessee separate lease and nonlease...Ch. 18 - How does a lessor separate lease and nonlease...
Ch. 18 - Does a lessee have an option not to separate lease...Ch. 18 - What are the criteria for a lessee to report a...Ch. 18 - Prob. 18.13QCh. 18 - Can the lessor account for a lease either as an...Ch. 18 - What is the difference in the lessees lease...Ch. 18 - How does a guaranteed residual value affect the...Ch. 18 - Prob. 18.17QCh. 18 - What discount rate does the lessee use to...Ch. 18 - Does the choice of discount rate (i.e., the lessee...Ch. 18 - Prob. 18.20QCh. 18 - Prob. 18.21QCh. 18 - Prob. 18.22QCh. 18 - How does a lessee measure the lease liability?Ch. 18 - What is the lessees short-term lease policy...Ch. 18 - Prob. 18.25QCh. 18 - What are the lessee s accounting and reporting...Ch. 18 - Prob. 18.27QCh. 18 - Prob. 18.28QCh. 18 - Prob. 18.29QCh. 18 - How does the lessor measure the net investment in...Ch. 18 - Prob. 18.31QCh. 18 - Prob. 18.32QCh. 18 - Prob. 18.33QCh. 18 - Baxter Brothers, Inc. enters into a four-year...Ch. 18 - Zhou Systems signed a 5-year lease at the...Ch. 18 - Insight Corporation leases equipment for 5 years...Ch. 18 - Lowe Leasing Company recently leased machinery to...Ch. 18 - Prob. 18.5MCCh. 18 - Prob. 18.6MCCh. 18 - Prob. 18.7MCCh. 18 - Bischoff Enterprises leases office space from...Ch. 18 - Identifying Lease and Nonlease Components. Deane...Ch. 18 - Prob. 18.2BECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as a Finance or Operating Lease,...Ch. 18 - Prob. 18.7BECh. 18 - Prob. 18.8BECh. 18 - Prob. 18.9BECh. 18 - Classification of Lease, Lessor, IFRS. Repeat the...Ch. 18 - Prob. 18.11BECh. 18 - Finance Lease, Lessee, Lessor, Guaranteed Residual...Ch. 18 - Finance Lease, Lessee, Lessor, Unguaranteed...Ch. 18 - Composition of Lease Payments, Variable Payments....Ch. 18 - Composition of Lease Payments. Variable Payments....Ch. 18 - Determining the Implicit Rate In the Lease. Assume...Ch. 18 - Prob. 18.17BECh. 18 - Prob. 18.18BECh. 18 - Prob. 18.1ECh. 18 - Allocation of Total Payments to Lease and Nonlease...Ch. 18 - Operating Lease, Nonlease Components, Lessee....Ch. 18 - Operating Lease, Rate or Index, Effect of Variable...Ch. 18 - Prob. 18.5ECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.9ECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.12ECh. 18 - Prob. 18.13ECh. 18 - Finance Lease, Purchase Option, Lessee,...Ch. 18 - Prob. 18.15ECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.17ECh. 18 - Operating Lease, Lessor. True Image Copier Company...Ch. 18 - Operating Lease, Lessee, Amortization Schedules,...Ch. 18 - Prob. 18.20ECh. 18 - Prob. 18.21ECh. 18 - Classification as Finance or Operating Lease....Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance, Sales-Type, or...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Sales-Type Lease, Unguaranteed Residual Value,...Ch. 18 - Prob. 18.9PCh. 18 - Finance Lease, Purchase Option, Lessee,...Ch. 18 - Direct Financing Lease, Deferred Selling Profit,...Ch. 18 - Direct Financing Lease, Deferred Selling Profit,...Ch. 18 - Cases Judgment Cases Judgment Case 1: Comparison...Ch. 18 - Judgment Case 2: Lease Classification On January...Ch. 18 - Financial Statement Analysis Case You are...Ch. 18 - Surfing the Standards Case 1: Lease Contracts...Ch. 18 - Prob. 2SSCCh. 18 - Basis for Conclusions Case 1: Operating Lease...Ch. 18 - Prob. 2BCCCh. 18 - Basis for Conclusions Case 3: Lease Classification...
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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