P21-15. Please show all workings clearly. P21.15 (LO 2, 3) Groupwork (Lessee-Lessor Entries, Lease with anUnguaranteed Residual Value) Cleveland Group leased a new crane toAbriendo Construction under a 5-year, non-cancelable contract starting January 1,2022. Terms of the lease require payments of R$48,555 each January 1, startingJanuary 1, 2022. The crane has an estimated life of 7 years, a fair value ofR$240,000, and a cost to Cleveland of R$240,000. The estimated fair value of thecrane is expected to be R$45,000 (unguaranteed) at the end of the lease term. Nobargain purchase or renewal options are included in the contract, and the crane isnot a specialized asset. Both Cleveland and Abriendo adjust and close booksannually at December 31. Collectibility of the lease payments is probable.Abriendo's incremental borrowing rate is 8%, and Cleveland's implicit interestrate of 8% is known to Abriendo.Instructionsa. Identify the type of lease involved and give reasons for your classification.Discuss the accounting treatment that should be applied by the lessor.b. Prepare all the entries related to the lease contract and leased asset for theyear 2022 for the lessee and lessor, assuming Abriendo uses straight-linedepreciation for all similar leased assets, and Cleveland depreciates the asseton a straight-line basis with a residual value of R$15,000.c. Discuss what should be presented in the statement of financial position, theincome statement, and the related notes of both the lessee and the lessor atDecember 31, 2022.

The type of lease involved is an operating lease because the asset is not a specialised asset and…

a. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by the lessor. b. Prepare all the entries related to the lease contract and leased asset for the year 2022 for the lessee and lessor, assuming Abriendo uses straight-line depreciation for all similar leased assets, and Cleveland depreciates the asset on a straight-line basis with a residual value of R$15,000. c. Discuss what should be presented in the statement of financial position, the income statement, and the related notes of both the lessee and the lessor at December 31, 2022.

a. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by the lessor. b. Prepare all the entries related to the lease contract and leased asset for the year 2022 for the lessee and lessor, assuming Abriendo uses straight-line depreciation for all similar leased assets, and Cleveland depreciates the asset on a straight-line basis with a residual value of R$15,000. c. Discuss what should be presented in the statement of financial position, the income statement, and the related notes of both the lessee and the lessor at December 31, 2022.

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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