A lease agreement that qualifies as a finance lease calls for annual lease payments of $40,000 over a six-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 7%. Required: If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?
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- ok nt ences A finance lease agreement calls for quarterly lease payments of $7,056 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $168,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required B >A lease agreement that qualifies as a finance lease calls for annual lease payments of $36,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Determine the present value of the lease upon the lease's inception. Create a partial amortization table through the second payment on January 1, Year 2. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $91,200 Lease term, 4 years Economic life of property, 5 years Implicit interest rate, 6% Annual lease payment due on December 31, $25,600 Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. How much is interest expense on the lease for the first year? Select one: a. $5,472 b. $2,736 c. $5,322 d. $1,331
- Each of the four independent situations below describes a sales-type lease in which annual lease payments of $17,500 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee. Unguaranteed Purchase option: After (years) Exercise price Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 1 70,000 2 Situation 1 70,000 4 4 8% $0 $0 none 3 2 70,000 Situation 4 Reasonably certain? 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) 8% $ 7,000 $0 4 $ 8,500 no 4 5 8% $3,500 $ 3,500 $ 2,500 no 4 4 7 8% $0 $ 7,000 3 $ 4,500 yesA lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Complete the amortization schedule for the first two payments. 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 its balance sheet at the end of the first year? What would be the interest payable?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
- On 1 July 2020, Table Ltd leased equipment from Chair Ltd. The following are details of the equipment and the lease contract: On 1 July 2020 equipment has a fair value of $110,000 (at fair value in Chair Ltd’s accounts) Lease term is 5 years, useful life of the equipment is 6 years, and Table Ltd will return the equipment at the end of the lease term Lease payments are in advance and will be paid on 1 July of each year, starting 1 July 2020, with $24,000 as the annual payment Residual value of the equipment at the end of the lease term is $8,000, with Table Ltd guaranteeing 75% of the residual value The interest rate implicit in the lease arrangement is 6%. In setting up the lease arrangement Table Ltd incurred costs of $2,354, while Chair Ltd incurred costs of $3,141. Required: a) Prepare the necessary journal entries for Table Ltd on 1 July 2020. b) Calculate interest and depreciation expense incurred on 30 June…On July 1, 2020, Shroff Company leased a warehouse building under a 10-year lease agreement. The lease requires quarterly lease payments of $4,500. The first lease payment is due on September 30, 2020. The lease was reported as a finance lease using an 8% annual interest rate. a. Prepare the journal entry to record the commencement of the lease on July 1, 2020. b. Prepare the journal entries that would be necessary on September 30 and December 31, 2020. c. Post the entries from parts a and b in their appropriate T-accounts. d. Prepare a financial statement effects template to show the effects template to show the effects of the entries from parts a and b on the balance sheet and income statement.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
- At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?NoneA lease agreement calls for annual payments of $56,979 over a 6-year period (also the asset's useful life). The lease is signed January 1, 20X1 with the first payment due on that date. The interest rate is 8%, and the PV of lease payments is $284,480. The lessor manufactured the asset at a cost of $270,000. 24. In year 20X1, the lease decreases the lessee's net income by 25. In year 20X1, the lease increases the lessor's net income by,