Accounting for Leases Using Finance and Operating Lease Methods Core Co. leased a piece of manufacturing equipment from E - So Co. with the following terms:Annual lease payment: $660,000 Term of lease: 5 years Interest rate: 4% Lease commences on January 1, 2023 Payments are made on December 31 of each year inthe lease term For parts a and b: a. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as afinance lease. b. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as an operating lease.

To solve this problem, we need to calculate the present value of the lease payments using the given…

Answered: Accounting for Leases Using Finance and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Prepare the journal entries Leasing AG would make in 2020 related to the lease arrangement.
Finance Lease 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 5 years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. What is the balance sheet value of the lease asset and the lease liability? Round answer to the nearest whole number. $ 95,248 How much is interest expense in the first year? What is the reduction in the lease liability in the first year? Round answers to the nearest whole number. Interest expense for first year $ 4,762 Reduction of lease liability What is the total expense if straight-line amortization is used for the leased asset? Round answer to the nearest whole number. $ 0
2...new.continue...c The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Crane Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term, guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Suppose Crane received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $enter a…
Provide all journal entries that Kelly K. inc. will record over the whole term of the lease.
Leases: Dowell leased the warehouses 1 year ago on December 31. The 5 year lease agreement called for Dowell to make quarterly lease payments of $2,398,303 payable each December 31, March 31, June 30 & September 30, with the first payment at the lease’s beginning. As a finance lease, Dowell had recorded the right-of-use asset and liability at $40 million, the present value of the lease payments at 8%. Dowell records amortization on a straight-line basis at the end of each fiscal year. Today, Dowell’s controller explained a proposal to sublease the underused warehouses to American Tankers Inc for the remaining 4 years of the lease term. American Tankers would be substituted as lessee under the original lease agreement. As the new lessee, it would become the primary obligor under the agreement, and Dowell would not be secondarily liable for fulfilling the obligations under the lease agreement. How would we need to account for this? After the first full year under the warehouse…
dont give ansewr in image format
needed: lease liabilityright of use of assetdepreciation expenseplease use a table for explaining lease liab.
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.
Recording Operating Lease-Lessor Gomez Inc. leases a vehicle from CareMax Inc. on January 1 for a three-year period. Gomez agrees to make $9,600 annual payments beginning on January 1. Prepare the journal entries during the year for CareMax Inc. assuming that the fair value of the vehicle is $44,800 and it has a useful life of 6 years with no salvage value (depreciated using the straight-line method). CarMax Inc. appropriately classifies the lease as an operating lease. Note: Round your answers to the nearest whole dollar. Account Name Date Jan, 1 Dec. 31 Dec. 31 Check To record receipt of lease payment To record lease revenue + # To record depreciation → = → # Dr. 0 0 0 0 0 0 Cr. 0 0 0 0 0 0
Accounting for Leases (FSET) On January 3, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $18,000 with the first payment due December 31. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Using the financial statement effects template, report the entries that Hanna Corporation would make on January 3 and December 31 to record this lease assuming 1. the lease is reported as an operating lease. II. the lease is reported as a finance lease. Note: Use negative signs with your answers, when appropriate. Note: Select "NA" as your answer if a part of the accounting equation is not affected. to the nearest • Note: Round answers to the nearest whole dollar. 1. Operating Lease: II. Finance Lease: Operating lease commences Lease payment. Transaction Record lease expense and changes to asset and liability.…
Determining Amounts in Operating Lease-Lessee Kulver's Inc. leases equipment from Equip Inc. on January 1 under a 3-year operating lease. Kulver's agrees to pay Equip Inc. $15,000 annually with the first payment due on January 1. As an incentive for Kulver's to sign the lease by January 1, Equip Inc. paid Kulver's Inc. $700. Kulver's also incurred legal fees for the review of the lease agreement ($200) and salaries for employees involved in negotiating the lease ($1,300). Assuming an incremental borrowing rate of 7% for Kulver's Inc., determine the value of the lease liability and the right-of- use asset on January 1 for Kulver's. Note: Round your answers to the nearest whole dollar. Lease liability $ 11,620 X Right-of-use asset $ 41,620✔ Check
Mining Type of Lease and Subsequent Accounting Instructions On January 1, 2016, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: Chart of Accounts Next Level General Journal • 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 and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2024. • The cost of the equipment to the lessor is $145,500, and the fair retail value is approximately $223,900. The lessor incurs no material initial direct costs. EE The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. • The lessor estimates that the fair value is expected to be…

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS