Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.
Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To Determine: The pretax amount related to lease reported by Company W in the statement of cash flow for the year ended December 31, 2018.
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Chapter 21 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $18,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $106,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. 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) Required: 1) Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2) Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of…arrow_forwardExercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. . The contract calls for four rent payments of $20,000 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $110,000 and were expected to have a useful life of eight years with no residual value. . Both firms record amortization and depreciation semiannually. 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) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first…arrow_forwardExercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $14,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $99,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the…arrow_forward
- Problem 7 Aespa Company leased equipment from Naevis Company on July 1, 2021 for eight-year period expiring June 30, 2029. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest contemplated by Aespa and Naevis is 10%. The cash selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease Is appropriately recorded as a sales type lease. 1. What amount of Gross Income on sale should be recorded for the year? a. 600,000 b. 720,000 c. 360,000 d. 300,000 2. What amount of interest revenue should be recorded for the year ended December 31, 2021? a. 292,000 b. 146,000 c. 352,000 d. 176,000arrow_forwardExercise 15-4 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-2] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,152 over a four-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $4.1 million. 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) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (ignore taxes)?…arrow_forwardExercise 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_forward
- Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,355 over a five-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $4.90 million. 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) Required: 1. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in…arrow_forward2 points Exercise 15-5 (Algo) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $512,709 over a 5-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.5 million. 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) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3.…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) 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% $375,000arrow_forward
- 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) 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_forwardS Exercise 15-3 (Algo) Finance lease; lessee; balance sheet and income statement effects [LO15-2] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,152 over a four-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $4.10 million. 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) Required: 1. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in…arrow_forwardProblem 3 On January 1, 2020, Berto Company leased a machinery with an estimated useful life of 8 years. The contract is a six-year noncancelable lease with a 10% implicit interest rate. PV of an annuity due of 1 at 10% for six periods 4.7908 PV of 1 at 10% for six periods 0.5645 The lease contains neither a transfer of title to the lessee nor a purchase option. The lease requires annual payments of P500,000 beginning January 1, 2020. The entity had a residual value guarantee of P400,000 when the machinery is returned to the lessor upon the lease expiration. Required: 1. Prepare a table of amortization of the lease liability and interest expense. 2. Prepare journal entries for 2020 and 2021. 3. Prepare journal entry on January 1, 2026 to record the return of the machinery to the lessor. Assume the fair value of the asset is P450,000. 4. Prepare journal entry on January 1, 2026 to record the return of the machinery to the lessor. Assume the fair value of the asset is P300,000.arrow_forward
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