Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 18, Problem 18.9E
a.
To determine
The initial measurement of right of use asset and lease liability.
Given information:
Lease term is 7 years.
Annual rentals are $40,000 on 1/Jan each year.
Implicit rate is 3.5%.
Prepaid rent is $40,000.
Incentive received is $15,000.
Initial direct cost to lessee is $5,000.
b.
To determine
To prepare: The
Given information:
Lease term is 7 years.
Annual rentals are $40,000 on 1/Jan each year.
Implicit rate is 3.5%.
Prepaid rent is $40,000.
Incentive received is $15,000.
Initial direct cost to lessee is $5,000.
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On January 1, 2019, AA Company leased a plastic molding machine from BB Company. Additional information regarding the lease agreement follows:
Lease term
4 years
Annual rental payment, in advance
66,500
Residual value at the end of the lease term
15,000
Residual value guaranteed by AA
0
Implicit rate
8%
Expected useful life of the machine
6 years
AA intends to return the machine to BB at the end of the lease. The annual rental payment includes P1,500 to cover the costs of maintenance and insurance. AA Company, likewise paid P8,000 to its broker for securing the lease.
(Use two decimal places for present value factor in answer the following questions)
- What is the balance of the lease liability at January 1, 2019?
- What is the interest expense to be reported by AA in 2019?
- What is the balance of the lease liability at December 31, 2019?
- What is the depreciation expense reported in 2019?
- What is the carrying value of the leased asset at December 31, 2019?
Please provide solutions
Company A leases equipment from Company B in a finance lease. Lease payments of $3,226 are due
quarterly over a 10 year period, with the first payment due July 1, the beginning of the lease. The
annual interest rate is 8%.
What is the outstanding balance in the Lease Payable account after the second payment?
What is the outstanding balance in the Right-of-Use asset account after the second payment?
A company signs a lease acquiring the right to use property for five years. Lease payments of $17156.31 are to be made annually at the end of this year and the next four years. The discount, or interest, rate is 8 percent per year. (Use factor table in Appendix B for calculation)
Required 1: What is the present value of the lease payments? $
Required 2: In the first payment, what is the amount of interest cancelled? $
Required 3: In the second payment, what is the amount of lease paid net of interest? $
Required 4: In the last payment, what is the amount of interest cancelled? $
Required 5: Assume the lease contract has the option to buy the property for the present value of the remaining payments plus $50,000. If the company decides to buy the property at the end of the third year immediately before the third payment, how much it must pay in dollars at the end of period 3? $
Chapter 18 Solutions
Intermediate Accounting, Student Value Edition (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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