11. Glade Company leases computer equipment to customers under direct financing lease. The equipment has no residual value at the end of the lease and the leases do not contain purchase option. Glade wishes to earn 8% interest on a five- year lease of equipment with a fair value of P323,400. The present value of an annuity due of P1 at 8% for 5 years is 4.312. What is the total amount of interest revenue that Glade will earn over the life of the lease? * a. P51,600 b. P75,000 c. P129,360 d. P139,450

11. Glade Company leases computer equipment to customers under direct financing lease. The equipment has no residual value at the end of the lease and the leases do not contain purchase option. Glade wishes to earn 8% interest on a five- year lease of equipment with a fair value of P323,400. The present value of an annuity due of P1 at 8% for 5 years is 4.312. What is the total amount of interest revenue that Glade will earn over the life of the lease? * a. P51,600 b. P75,000 c. P129,360 d. P139,450

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Assume that on January 1, 2025, Elmer's Restaurants sells a computer system to Sunland Finance Co. for $620,000 and immediately leases back the computer system. The relevant information is as follows. 1. The computer was carried on Elmer's books at a value of $540,000. 2 The term of the non-cancelable lease is 3 years; title will not transfer to Elmer's, and the expected residual value at the end of the lease is $390,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $112,790 at the beginning of each year. 4. The incremental borrowing rate for Elmer's is 8%. Elmer's is aware that Sunland Finance set the annual rental to ensure a rate of return of 8%. 5. The computer has a fair value of $620,000 on January 1, 2025, and an estimated economic life of 10 years. Prepare the journal entries for both the lessee and the lessor for 2025 to record the sale and leaseback agreement. (For calculation purposes, use 5 decimal places as displayed in the factor…
On 1 January 2020, Moon Co entered into a five-year lease of equipment which has a remaining useful life of eight years. Lease payments are BD84,000 per annum, payable at the beginning of each year. Moon Co incurred initial direct costs of BD36,000 and received lease incentives of BD4,400. There is no transfer of the asset at the end of the lease and no purchase option. The interest rate implicit in the lease is 7%. At the commencement date of the lease, Moon Co paid initial BD84,000, incurred the direct costs and received the lease incentives. Moon Co uses the straight-line method of depreciation. (Note: Present value annuity factor for four years and 7% is 3.387). Required: (a) Prepare the relevant extracts from the financial statements of Moon Co for the year ended 31 December 2020 (Note: Show your workings and round to the nearest BD). (b) Using the conceptual framework for financial reporting, discuss the rationale for and accounting implications of adopting IFRS 16 Leases.
Kit Company leased equipment at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Kit is given the option to purchase the asset for P75,000 at the end of the lease term and Kit is reasonably certain to exercise this option. The appropriate interest rate is 12%. Present value of 1 at 12% for 5 periods is 0.5674. Present value of an annuity due of 1 at 12% for 5 periods is 4.0373. What is the capitalized cost of right of use equipment? a. 225,000 b. 300,000 c. 224,234 d. 189,679
On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000
5. On June 30, year 1, Menchen, Inc. leased equipment from Davis Leasing. The lease agreement calls for Menchen to make semiannual lease payments of $ 400, 500 over a seven- year lease term, on June 30 and December 31. This is also the assets useful life. The first payment was due immediately on June 30, year 1. The interest rate used is the incremental borrowing rate of 11%. The cost of the asset to Davis was $ 4,051,891 using a factor of 10.11708. a. using an amortization table what amount would Davis show on its balance sheet on December 31, year 1? b. what amount would Davis show on its income statement on December 31,year 1?
6. Explosive Leasing acquires equipment and leases it to customers under long-term sales-type leases. Explosive earns interest under these arrangements at a 6% annual rate. Explosive purchased a device and then leased it for $342,400 under an arrangement that specified annual payments to be received for five years, beginning at the commencement of the lease. The lessee had the option to purchase the device at the end of the lease term for $49,650 when it was expected to have a residual value of $99,300. Calculate the amount of the annual lease payments. (Do not round intermediate calculations. Round your answer to nearest whole dollar amount.)The present value of $1: n = 5, i = 6% is 0.74726.The present value of an ordinary annuity of $1: n = 5, i = 6% is 4.21236.The present value of an annuity due of $1: n = 5, i = 6% is 4.46511.
Cullumber Company has a machine with a cost of $651000 which also is its fair value on the date the machine is leased to Park Company. The lease is for 6 years and the machine is estimated to have an unguaranteed residual value of $64000. If the lessor’s interest rate implicit in the lease is 12%, the 6 beginning-of-the-year lease payments would be 127,476 108,500 134,333 141,375
me.1
7
17. Concord Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $39,000 at the beginning of each year, and Concord’s incremental borrowing rate is 6%, which is the same as the lessor’s implicit rate.Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $264,000. Falls uses straight-line depreciation and the leased asset has zero residual value at the end of its useful life. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit…
ABC Company leases out an equipment under direct finance lease. There is no residual value nor bargain purchase option. The entity wishes to earn 8% on a 5-year lease of equipment costing P3,234,000. First annual lease payment is payable immediately on the contract date on January 1, Year 1. How much is the interest revenue for Year 1? (use three decimal places for the PV factors) P198,720 P258,720 P154,620 none
A bhaliya