33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease

33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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This lease is a(n) select a type of lease .

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts Save for Later Attempts: 0 of 3 used Submit Answer (b) The parts of this question must be completed in order. This part will be…
33. On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) Correct answer icon Your answer is correct. What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) What is the present value of the minimum…
33... On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (e) Record the interest payable on Skysong’s books at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125. 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 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a…
33... On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. Record the interest payable on Skysong’s books at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125. 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 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter…
33..... On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (e) Partially correct answer icon Your answer is partially correct. Record the interest payable on Skysong’s books at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125. 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 0 for the amounts.) Account Titles and…
33... continue On January 2, 2017 Skysong Company leases a machine with a fair value of $35,000 from Snead, Inc., on the following terms: 1. Noncancelable term of 4 years. 2. Rental of $8,525 per year (at beginning of each year). 3. Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease. 4. Estimated economic life of the machine is 5 years. 5. Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown. (a) Correct answer icon Your answer is correct. What is the nature of this lease to Skysong Company? This lease is a(n) select a type of lease . eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) Your Answer Correct Answer (Used)…
American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $4 million (fair valueand present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton’s implicit interestrate was 10%.Required:1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2018.2. Prepare an amortization schedule for the four-year term of the lease.3. Prepare the appropriate entries related to the lease on December 31, 2018.4. Prepare the appropriate entries related to the lease on December 31, 2020.
Macinski Leasing Company Leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3 year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3 year useful life and no residual value. The lease was signed on January 1, 2017. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2017. a) Discuss the nature of the lease agreement and the accounting method that each party to the lease should apply
Macinski Leasing Company Leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3 year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3 year useful life and no residual value. The lease was signed on January 1, 2017. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2017. a) Prepare the journal entry at commencement of the lease for Macinski b) Prepare the journal entry at commencement of the lease for Sharrer c) Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Macinski's implicit rate (Sharrer's incremental borrowing rate is 9%), and (2) Sharrer incurs initial direct costs of $10,000.
On January 1, 2018, Yancey, Inc. signs a 10 year concancelable lease agreement to lease a storage building from Holt Warehouse company. Lease payments is predictable and no important uncertainties surround the amount of costs to be incurred by the lessor: Following information: 1. equal rental payments at beginning of each year 2. Fair value of building is $6,000,000, book value is $4,950,000 3. Building has a life of 10 years with no residual value. Yancey uses straight line method 4. At end of lease, ownership transfer to the lessee. 5. Yancey's borrowing rate is 11%. Holt set the annual rental to insure a 10% rate of return. 6. The yearly rental payment includes $15,000 of executory costs. What is the amount of the total annual lease payment?
Assume that IBM leased equipment that was carried at a cost of $150,000 to Sharon Swander Company. The term of the lease is 6 years beginning January 1, 2017, with equal rental payments of $30,044 at the beginning of each year. All executory costs are paid by Swander directly to third parties. The fair value of the equipment at the inception of the lease is $150,000. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain-purchase option, and no transfer of title. Collectibility is reasonably assured with no additional cost to be incurred by IBM.Prepare IBM’s January 1, 2017, journal entries at the inception of the lease.

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1.		Noncancelable term of 4 years.
2.		Rental of $8,525 per year (at beginning of each year).
3.		Estimated residual value after 4 years is $8,200. Skysong Company guarantees the residual value of $4,100 and expects the asset to have a value of $4,100 at the end of the lease.
4.		Estimated economic life of the machine is 5 years.
5.		Skysong Company’s incremental borrowing rate is 6% a year. Snead’s implicit rate is unknown.