On January 1, 2021, a lessee company signed a noncancelable finance lease for a piece of equipment. The lessee will make annual payments of $114,000 at the beginning of each year during the lease term, starting from 1/1/2021. The lease liability was determined to have a present value of $467,000 at an effective interest rate of 10% (assumed for ease of computation; please do not attempt computations beyond years necessary). With respect to this lease, the lessee should record interest expense for 2022 at $_________. (DO NOT round for any part of the computation.
Q: On December 31,2019, ABC Company signed a 5-year, non-cancelable lease for a machine with DEF…
A: A lease refers to when one party give assets for use to another party for a periodic payment and for…
Q: t January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: Lease payment The purpose of lease is when the company required for the capital assets which are…
Q: On December 31,2019, ABC Company signed a 5-year, non-cancelable lease for a machine with DEF…
A: A contractual agreement between two parties where one party agrees to obtain the right to use an…
Q: On January 1, 2019, Pharoah Inc., a construction company, leased an excavator from Leaselt Inc. The…
A: The right of use asset is calculated as present value of annual lease payments and residual value at…
Q: Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The…
A: The lists of capital lease criteria are as follows: The present value of lease covers almost the…
Q: On December 31, 2019, Skysong Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: Lease liability is the obligation on the lessee to make payments.
Q: On December 31, 2021, Maroon Co. leased an equipment with a cost of P2,000,000 to Green Co. for…
A: As per IFRS 16, Leases, Lessor will recognize Net investment in lease on lease commencement date…
Q: On December 31, 2021, Maroon Co. leased an equipment with a cost of P2,000,000 to Green Co. for…
A: In the case of lease accounting, the asset under the lease contract is a long-term asset to the…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…
Q: Sunset Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The…
A: Partial amortization schedule:
Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…
A: As per the accounting standard, A lease means where an asset owner gives his asset custody to some…
Q: TWO Corporation entered into a nine-year lease on a warehouse on December 31, 2020. The estimated…
A: 1) The amount of lease liability to be reported is Present value of annual lease payments at…
Q: Prepare Sheridans' December 31, 2019, journal entries assuming the implicit rate of the lease is 10%…
A: Particular year Cashflow PVF@ 10% PV of cashflows Lease receipts 0 $36100.00 1.000 $36100.00…
Q: Metlock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to…
A: Lease contact provides the right to the lessee to use an asset but it does not provide the…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A:
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: The question is related to Accounting for Lease. The assets has been given for 10 years by lessor…
Q: ClevelandInc. leased a new crane to Abriendo Construction under a 5-year, non-cancelable contract…
A: Lease Assets:- A leased asset is an asset that has been let out by the lessor to the lessee for the…
Q: On January 1, 2020, Warden Industries signed a ten-year noncancelable lease for machinery. Warden is…
A: Lease is the contract where asset owner(lessor) provides the asset to another person who uses the…
Q: On January 1, 2019, Bridgeport Inc., a construction company, leased an excavator from Leaselt Inc.…
A: Calculation of initial measurement of Right-of-use Asset and liability: Year PV factor @ 6%…
Q: On December 31, 2019, Windsor Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: In a lease agreement, if any of the following four criteria it will be classified as capital lease…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement…
A: Solution:- Calculation of the cost of amortization in 2021 as follows under:-
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Annual payment = $8,148 Borrowing rate = 10% PV Factor = 4.16987
Q: Windsor Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7…
A: Leasee Windsor Corporation Lease Payment beginning of dec 31, 2019 $ 41,100 Period 7…
Q: On January 1, 2021, a lessee company signed a noncancelable finance lease for equipment. The lessee…
A: On 01.01.2021, A lessee company signed a noncancelable finance lease for equipment. Lessee make…
Q: Delray Leasing Company signs an agreement on January 1, 2020, to lease equipment to Swifty Company.…
A: Introduction Lease is an agreement between leaser and lessee in which leaser allows lessee to use…
Q: On December 31, 2019, Escapee Company leased machinery from Terminator Corporation for an…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On January 1, 2019. Eric, the lessee, and Betty, the lessor, signed a noncancelable lease agreement…
A: Lease: It is an agreement wherein one party allows another to use the assets for the specified…
Q: On December 31, 2021, Maroon Co. leased an equipment with a cost of P2,000,000 to Green Co. for…
A: Residual value is of two types-one is guaranteed residual value and the other is unguaranteed…
Q: On December 31, 2019, Burke Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: a.) As per the question, it appears as an operating lease because the ownership rights are retained…
Q: On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a…
A: The lease gives the right to the person to use the asset without purchasing that asset.
Q: On December 31, 2019, Barton, Inc. leased lab equipment with a fair value of $1,650,000 from Banner…
A: The lease liability reflects the present value of amount which is still payable on the lease…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A:
Q: On March 31, 2021, Southwest Gas leased equipment from a supplier and agreed to pay $370,000…
A: Present value is the current value of a future sum of money given at a specified rate of interest.…
Q: Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7…
A: A lease is a contract laying out the terms under which one party consents to rent property claimed…
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: It is an agreement whereby the Lessee secures the right to use the asset but not its ownership.
Q: On January 1, 2019, Shak, Inc. signed a noncancelable lease for a sneaker shining machine. The…
A: Introduction: A noncancelable lease for a shoe polishing machine was signed by Shak, Inc. The…
Q: Jewel Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The…
A: Given: Fair value of lease = $34,500 Lease period = 3years Implicit rate = 5%
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: The questions are multiple choice questions. Required Choose the Correct Option.
Q: On January 1, 2022, ABC Company signed a 5-year non-cancelable lease for a building. This is also…
A: Lease Obligation There are mainly two types leases are there one is operating leases and another one…
Q: On June 1, 2019, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual…
A: Depreciation refers to the reduction in the sum value of an asset over a course of time that…
Q: On January 1, 2021, Coronado Industries leased a building to Sandhill Co. for a ten-year term at an…
A: Current Liabilities are the liabilities which are expected to be paid within the next one year after…
Q: Sheridan Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6…
A: Calculation of Present value of Minimum lease payments/Lease liability Period Particulars…
Q: Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7…
A: The lease liability includes the present value of cash payments in relation to the lease. In case,…
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Answer: As per given -
Q: On March 31, 2021, Southwest Gas leased equipment from a supplier and agreed to pay $200,000…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement…
A: Amortization is the reduction in the value of intangible asset over a period of time.
On January 1, 2021, a lessee company signed a noncancelable finance lease for a piece of equipment. The lessee will make annual payments of $114,000 at the beginning of each year during the lease term, starting from 1/1/2021. The lease liability was determined to have a present value of $467,000 at an effective interest rate of 10% (assumed for ease of computation; please do not attempt computations beyond years necessary). With respect to this lease, the lessee should record interest expense for 2022 at $_________. (DO NOT round for any part of the computation.)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.
- Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).On January 1, 2021, a lessee company signed a noncancelable finance lease for equipment. The lessee will make annual payments of $94,000 at the end of each year during the lease term, beginning on December 31, 2021. The lease liability was determined to have a present value of $469,000 (assumed; please do not attempt computations beyond years necessary) at an effective interest rate of 8%. At the end of 2022, one journal entry the lessee makes is:Lease Liability xxxInterest Expense xxx Cash xxx In the above entry, how much should the lessee debit Lease Liability on December 31, 2022? (DO NOT round for any part of the computation.)
- On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. The lease arrangement is for 8 years. Lease payments are $168,000 per year and are made at the beginning of the year. The lessee incurred initial direct costs of $65,000. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 168,000 40,000 1/1/2023 168,000 36,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. Lease payments are $57,000 per year and are made at the beginning of the year. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 57,000 44,000 1/1/2023 57,000 38,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)On January 1, 2021, a lessee company signed a noncancelable finance lease for a piece of equipment. The lease term is 7 years. The lease agreement provides for the transfer of title of the asset to the lessee at the end of the lease term. The equipment has an estimated useful life of 12 years. It has no salvage or residual value. The lessee uses the straight-line method of amortization for all of its fixed assets. The lessee records the right-of-use asset at $155,000 on January 1, 2021. With respect to this finance lease, the lessee should record the amortization expense for 2021 at $_________. (If no amortization expense should be recorded, then enter 0. Round your answer to the nearest dollar, if necessary.)