On January 1, 2023, Cullumber Inc. enters into a 5-year non-cancellable lease with Wilson Ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,962,000. Cullumber has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%, Cullumber uses the straight-line depreciation method to depreciate assets. Cullumber will make annual lease payments on January 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. The lease agreement includes a guarantee that Cullumber will take over ownership of the equipment from Wilson for a final payment of $101,000. Both companies adhere to IFRS. (a) Calculate the lease payment Wilson Ltd. will charge Cullumber Inc assuming that there is no mark up on the fair value of the equipment. (Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Click here to view the factor table. Lease payment

On January 1, 2023, Cullumber Inc. enters into a 5-year non-cancellable lease with Wilson Ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,962,000. Cullumber has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%, Cullumber uses the straight-line depreciation method to depreciate assets. Cullumber will make annual lease payments on January 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. The lease agreement includes a guarantee that Cullumber will take over ownership of the equipment from Wilson for a final payment of $101,000. Both companies adhere to IFRS. (a) Calculate the lease payment Wilson Ltd. will charge Cullumber Inc assuming that there is no mark up on the fair value of the equipment. (Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Click here to view the factor table. Lease payment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2023, Sandhill Inc. enters into a 5-year non-cancellable lease with Wilson Ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,994,000. Sandhill has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. Sandhill uses the straight-line depreciation method to depreciate assets. Sandhill will make annual lease payments on January 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. The lease agreement includes a guarantee that Sandhill will take over ownership of the equipment from Wilson for a final payment of $106,500. Both companies adhere to IFRS. (a) Calculate the lease payment Wilson Ltd. will charge Sandhill Inc assuming that there is no mark up on the fair value of the equipment. (Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Lease payment $
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On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $794,023 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $106,000. Negotiations led to the lessee guaranteeing a $152,000 residual value. Equal payments under the lease are $206,000 and are due on December 31 of each year with the first payment being made o December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments. 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 the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease. 2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease.…
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $794,023 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $106,000. Negotiations led to the lessee guaranteeing a $152,000 residual value. Equal payments under the lease are $206,000 and are due on December 31 of each year with the first payment being made of December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments. 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 the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease. 2. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease. >…
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $865,757 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $121,000. Negotiations led to the lessee guaranteeing a $182,000 residual value. Equal payments under the lease are $221,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments.
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Angelo Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P2,300,000. On January 1, 2020, Angelo Company leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual payment are due each January 1 and the first payment was made on January 1, 2020. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is earned by Angelo Company. What is the annual lease payment payable in advance required to yield the desired return?
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