AC3220 Corp., who reports under ASPE, leases computer equipment on January 1, 2023, and records thisas a capital lease. Three annual lease payments of $10,000 are required the beginning of each year,starting January 1, 2023. The interest rate for the lease 10%. Title passes to AC3220 at the end of thelease.AC3220 uses the effective interest method of amortization for the lease. The company uses straight-linedepreciation over the equipment's expected useful life of three years, with no residual value.Instructions (Round values to the nearest dollar.)a) Calculate the present value of the lease paymentsb) Prepare a lease amortization table for 2023, 2024, and 2025.c) Prepare the general journal entries relating to this lease for 2023.Paragraph ✓DateBI UA+ v...BeginningBalancePaymentInterestExpenseLeaseAmortizationEndingBalance11.

The objective of the question is to calculate the present value of the lease payments, prepare a…

Answered: AC3220 Corp., who reports under ASPE,…

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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Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $57,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Blue’s incremental borrowing rate is 9%. Blue is unaware of the rate being used by the lessor. At the end of the lease, Blue has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blue uses the straight-line method of depreciation on similar owned equipment.Click here to view factor tables. (a) Prepare the journal entries, that Blue should record on December 31, 2020. (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.…
On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $72,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8%. Winn also paid a $231,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $303,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year. (If no entry is required for a transaction/event, select…
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
On January 1, 2021, Coronado Industries leased a building to Sandhill Co. for a ten-year term at an annual rental of $175000. At inception of the lease, Coronado received $701000 covering the first two years' rent of $350000 and a security deposit of $351000. This deposit will not be returned to Sandhill upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $701000 should be shown as a current and long-term liability, respectively, in Coronado's December 31, 2021 balance sheet? Current Liability Long-term Liability $350000 $175000 $175000 $350000 $0 $701000 $350000 $351000
On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: • The lease is noncancelable and has a term of 8 years. • The annual rentals are $39,200, payable at the beginning of each year. • The interest rate implicit in the lease is 11%. • Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2026. • The cost of the equipment to the lessor is $145,500, and the fair value is approximately $223,900. • Ballieu incurs no material initial direct costs. • It is probable that Ballieu will collect the lease payments. • Ballieu estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of $39,200 discounted at…
Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Whispering's incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Whispering uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
On June 30, 2024, Blue, Incorporated leased a machine from Big Leasing Corporation. The lease agreement qualifies as a finance lease and calls for Blue to make semiannual lease payments of $212,190 over a four-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Blue’s incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. Determine the present value of the lease payments on June 30, 2024, that Blue uses to record the right-of-use asset and lease liability. What would be the amounts related to the lease that Blue would report in its balance sheet at December 31, 2024? (Ignore taxes.) What would be the amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2024? (Ignore taxes.)

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