On January 1, 2021, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Leasepayments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value byNIC. Portions of the United Leasing's lease amortization schedule appear below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Jan. 120212021202220232024202520261.2.WN3.4.20382039204020417Payments14,50014,50014,50014,50014,50014,50014,50014,50014,50038,4495.6. Net investmentEffective Decrease inInterestBalance11,80011,58411,35111,09910,8275,2504,5103,7112,848Lease termAsset's residual valueEffective annual interest rateLease payments for UnitedLease payments for NIC7.8. Right-of-use assetRequired:1. What is the lease term In years?2. What is the asset's residual value expected at the end of the lease term? (Round your answers to nearest whole dollar.)3. What is the effective annual Interest rate? (Round your percentage answer to 1 decimal place.)4. What is the total amount of lease payments for United? (Round your answers to nearest whole dollar.)5. What is the total amount of lease payments for NIC? (Round your answers to nearest whole dollar.)6. What is United's net Investment at the beginning of the lease (after the first payment)? (Round your answers to nearest wholedollar.)7. What is United's total effective interest revenue recorded over the term of the lease? (Round your answers to nearest whole dollar.)8. What amount would NIC record as a right-of-use asset at the beginning of the lease? (Round your answers to nearest wholedollar.)Total effective interest revenue14,5002,7002,9163,1493,4013,6739,2509,99010,78935,601OutstandingBalance162,001147,501144,801141,885138,736135,335131,66256,38046,39035,601years%

ade annually. Title does not transfer to the lessee the United Leasing's lease amortization schedule a (Use appropriate factor(s) from the tables provid ents 588 588 500 588 588 Effective Interest 11,800 11,584 11,351 11 899 Decrease in Balance 14,500 2,700 2,916 3,149 3 481 Outstanding Balance 162,001 147,581 144,881 141,885 138,736 135 335

ade annually. Title does not transfer to the lessee the United Leasing's lease amortization schedule a (Use appropriate factor(s) from the tables provid ents 588 588 500 588 588 Effective Interest 11,800 11,584 11,351 11 899 Decrease in Balance 14,500 2,700 2,916 3,149 3 481 Outstanding Balance 162,001 147,581 144,881 141,885 138,736 135 335

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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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…
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A18-11 Lessee Accounting; Amortization Table; Entries: (LO 18-2, 18-4) Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms. • The lease payments are $13,400 per year, payable each 1 April for four years. The lease may be renewed at the option of the lessor for a further five years for $4,000 per year. • Based on an allocation of the lease payment on relative stand-alone prices, the lease and non-lease components (maintenance) are $12,100 and $1,300 respectively. Expected amounts to be paid under the residual value guarantee are $11,400 if the lessee ends the lease at the end of the first lease term, and $3,800 if they end the lease at the end of the second lease term. • The leased asset has a useful life of ten years and a fair value of $64,000. The Interest rate implicit in the lease is 8%. . (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Calculate the right-of-use asset.…