Pharoah Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,300 each, beginning December 31, 2024. In addition, Pharoah guarantees the lessor a residual value of $19,200 at the end of the lease. However, Pharoah believes it is probable that the expected residual value at the end of the lease term will be $9,600. The equipment has a useful life of 7 years. Prepare Pharoahs' December 31, 2024, journal entries, assuming the implicit rate of the lease is 9% and this is known to Pharoah. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables. Date Account Titles and Explanation December 31, 2024 Right-of-Use Asset December Lease Liability (To record the lease liability) Lease Liability 31, 2024 Cash Debit 39300 Credit 39300

Pharoah Corporation enters into a 7-year lease of equipment on December 31, 2024, which requires 7 annual payments of $39,300 each, beginning December 31, 2024. In addition, Pharoah guarantees the lessor a residual value of $19,200 at the end of the lease. However, Pharoah believes it is probable that the expected residual value at the end of the lease term will be $9,600. The equipment has a useful life of 7 years. Prepare Pharoahs' December 31, 2024, journal entries, assuming the implicit rate of the lease is 9% and this is known to Pharoah. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables. Date Account Titles and Explanation December 31, 2024 Right-of-Use Asset December Lease Liability (To record the lease liability) Lease Liability 31, 2024 Cash Debit 39300 Credit 39300

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
Oriole Corporation enters into a 5-year lease of equipment on December 31, 2024, which requires 5 annual payments of $36,200 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $20,300 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $10,300. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Ark's 2024 and 2025 journal entries, assuming the implicit rate of the lease is 10% and this is known to Oriole. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For…
Oriole Corporation enters into a 6-year lease of equipment on December 31, 2024, which requires 6 annual payments of $36,300 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $18,400 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 6 years. Prepare Orioles' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Oriole. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables. Date December 31, 2024 December 31,…
Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
Wildhorse Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $41,000 each, beginning December 31, 2019. In addition, Wildhorse guarantees the lessor a residual value of $21,300 at the end of the lease. However, Wildhorse believes it is probable that the expected residual value at the end of the lease term will be $11,300. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 11% and this is known to Wildhorse. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…
Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
The lessor company signs a sales-type lease agreement on January 1, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $63,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $44,000. The lessor expects to earn a return of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 8%, 8 periods 1.85 0.54 10.64 5.75 6.21
Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.
Sunland Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $47,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Sunland's incremental borrowing rate is 8%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sunland uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entries, that Sunland should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account…
Indiana Jones Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires six annual payments of $40,000 each, beginning December 31, 2019. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at the end of the lease. However, Indiana Jones believes it is probable that the expected residual value at the end of the lease term will be $10,000. The equipment has a useful life of 6 years. Prepare Indiana Jones' December 31, 2019, journal entries, assuming the implicit rate of the lease is 6% and this is known to Indiana Jones.
Headland Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $37,100 each, beginning December 31, 2019. In addition, Headland guarantees the lessor a residual value of $20,900 at the end of the lease. However, Headland believes it is probable that the expected residual value at the end of the lease term will be $10,450. The equipment has a useful life of 6 years. Prepare Headlands' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Headland. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables. Date December 31, 2019 December 31, 2019 Account Titles and Explanation (To record the lease liability) (To record lease payment) Debit Credit