A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also theasset's useful life with the first payment at January 1, the beginning of the lease. The interest rate is 59 F of $1. PV of $1, F A of $1PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Requireda. Complete the amortization schedule for the first two payments.b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in itsbalance sheet at the end of the first year? What would be the interest payable?Complete this question by entering your answers in the tabs belowRequired A Required BIf the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report inits balance sheet at the end of the first year? What would be the interest payable?Lease liabilityInterest payable< Required A

A.Calculate Amortization schedule for first two years:

Answered: A lease agreement that qualifies as a…

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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Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease 1 Payable 11 10% 11% $640,000 Situation 2 15 8% 9% $1,000,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 3 6 11% 10% $205,000
On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales - type lease designed to earn Lesco a 12% rate of return for providing long-term financing. The lease agreement specified: 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) Ten annual payments of $56, 000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $322,741. The lease qualifies as a finance lease/sales - type lease. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $56,000 payments is an insurance premium of…
Classifying Leases The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of $50,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $10,000 per year. 2. Lease payments include a fixed payment of $10,000 per year, plus $500 for insurance and $600 for a maintenance contract. 3. Lease payments will be $10,000 in the first year and will increase by 3% (calculated on the previous year's payment) for each of the following 4 years. 4. Lease payments will be $10,000 in the first year and will increase each of the following years by the increase in the CPI from the preceding year. The current CPI is 120 and is expected to increase to 122 at the end of the next year. 5. Lease payments will be $10,000 in the first year and will increase each of the following years by (a) the increase in the CPI from the preceding year, or (b) 3%, whichever is greater. The current CPI is 120…
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 11 Situation 2 Situation 3 Lease Payments 10 11% 12% Right-of-use Asset/Lease Payable $780,000 Situation 20 9% 10% $1,150,000 3 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 6 12% 11% $365,000
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Situation 1 2 3 4 Lease term (years) Lessor's rate of return 4 10% 7 11% 5 8 9% 12% Fair value of lease asset $ 56,000 $ 356,000 $ 81,000 $ 471,000 Lessor's cost of lease asset $ 56,000 $ 356,000 $ 51,000 $ 471,000 Residual value: Estimated fair value 0 $ 56,000 Guaranteed fair value 0 0 $ 13,000 $13,000 $ 51,000 $ 56,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the essee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar amount. Answer is complete but not entirely correct. Lease Payments Residual…
Each of the four independent situations below describes a finance lease in which annual lease payments are pay- able at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Situation Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value 1 4 10% $50,000 $50,000 0 2 7 11% $350,000 $350,000 $ 50,000 0 3 5 9% $75,000 $45,000 $7,000 $7,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a right-of-use asset and a lease liability. 4 8 12% $465,000 $465,000 10 $ 45,000 $ 50,000
In Note 11, of its 2018 financial statements, Chipotle (CMG) reported the following future operat- ing lease information: E5.12 Contractually required future minimum cash lease payments under existing operating leases as of December 31, 2018, are as follows: $ 294,191 296,579 294,941 295,290 2019 2020 . 2021 2022 290,980 2,478,397 2023 Thereafter. Total minimum lease payments $3,950,378 a. Assuming a discount rate of 5 percent, estimate the unrecognized asset and liability for assets acquired under operating leases for CMG at December 31, 2018. b. Given the estimated unrecognized liability calculated in part a., what impact does including this amount have on the liabilities of CMG reported on the balance sheet?
Each of the four independent situations below describes a sales-type lease in which annual lease payments a at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 7 7 8 Lessor's and lessee's interest rate Residual value: 8 128 98 11% 10% Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers dollar amount.) Situation 2 A The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable B
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return (known by lessee) Lessee's incremental borrowing rate Fair value of lease asset Situation 1 Situation 2 Situation 3 Lease Payments Right-of-use Asset/Lease 1 Payable 10 10% 11% $780,000 Situation 2 15 8% 9% $1,070,000 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest whole dollar. 3 5 11% 10% $275,000
Each of the four independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. 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) Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value Situation 1 Situation 2 Situation 3 $ Situation 4 $ $ Lease Payments 14,340 62,310 $ 16,590 × $ 79,947 1 4 10% $ 50,000 $50,000 0 0 0 $ $ $ 5,000 $ 0 2 $ 350,000 $ 350,000 Situation $ 50,000 0 PV of Lease Payments 7 11% 50,000 325,917 70,336 × $ 444,806 Required: a. & b. Determine the amount of the annual lease payments as calculated by the lessor and the amount the lessee would record as a right-of-use asset and a lease liability, for each of the above situations. Note: Round your answers to the nearest…
A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. Required: Prepare a partial amortization table up to the October 1 payment. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1?
Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Cash Effective Decrease in Outstanding Payment Payment Interest Balance Balance 40,860 31,960 24,978 17,577 9,731 ?? 0 1 2 3 4 5 6 8,900 8,900 8,900 8,900 8,900 1,500 Multiple Choice $46,000 ?? 1,918 1,499 1,055 What is the total interest paid over the term of the lease? $2.760 ?? 85 ?? 6,982 7,401 7,845 ?? 1,415

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