Apparel Leasing Company signs a lease agreement on January 1, 2021, to lease equipment to Oman Company. The tem of the non-cancelable kase ist years, and payments are realthe end of each year. The following information related to this agreement1. The equipment has a cost and fair value of $28,500,000 to Apparel, an estimated useful life of 10 years, and no residual value at the end of that time. Areal as rentas $4,324,0182. Apparel Company desires to earn an 8% return on its investmentInstructions:A) Prepare an amortization schedule for the lessor for 2021 and 2022.B) Prepare the journal entries on the lessor's books on January 1, 2021 and December 31, 2021

Lease Receivable: It is the present value of lease receipts expected during the duration of lease…

Apparel Leasing Company signs a lease agreement on January 1, 2021, to lease equipment to Oman Company. The tem of the non-cancelable aseis years, and payments are wat the end of each year. The following information related to this agreement The equipment has a cost and fair value of $28,500,000 to Apparel, an estimated useful ife of 10 years, and no residual value at the end of the time A 24. 2. Apparel Company desires to earn an 8% return on its investment Instructions: A) Prepare an amortization schedule for the lessor for 2021 and 2022. B) Prepare the journal entries on the lessor's books on January 1, 2021 and December 31, 2021

Apparel Leasing Company signs a lease agreement on January 1, 2021, to lease equipment to Oman Company. The tem of the non-cancelable aseis years, and payments are wat the end of each year. The following information related to this agreement The equipment has a cost and fair value of $28,500,000 to Apparel, an estimated useful ife of 10 years, and no residual value at the end of the time A 24. 2. Apparel Company desires to earn an 8% return on its investment Instructions: A) Prepare an amortization schedule for the lessor for 2021 and 2022. B) Prepare the journal entries on the lessor's books on January 1, 2021 and December 31, 2021

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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Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. Instructions (Assume the accounting period ends on…
BestHuskies Corporation leases equipment from Falls Company on January 1, 2021. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. Assume the annual lease payment is $35,000 at the beginning of each year, and BestHuskies' incremental borrowing rate is 6%, which is the same as the lessor's implicit rate. Prepare BestHuskies' journal entries on January 1, 2021, and December 31, 2021. Show your work for partial credits.
Sheffield Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased.Prepare Sheffield’s journal entries on January 1, 2020, and December 31, 2020. Assume the annual lease payment is $44,000 at the beginning of each year, and Sheffield’s incremental borrowing rate is 9%, which is the same as the lessor’s implicit rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)Click here to view factor tables. Date Account Titles and Explanation Debit…
On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Bensen set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Instructions (Both the lessor and the lessee's accounting periods end on December 31.) a. Discuss the nature of this lease to Bensen and Flynn. b.…
Marin Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Cullumber Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Cullumber has the option to purchase the equipment for $27,000 upon termination of the lease. It is not reasonably certain that Cullumber will exercise this option.2. The equipment has a cost of $340,000 and fair value of $396,500 to Marin Leasing. The useful economic life is 2 years, with a residual value of $27,000.3. Marin Leasing desires to earn a return of 5% on its investment.4. Collectibility of the payments by Marin Leasing is probable. Prepare the journal entries on the books of Marin Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. Assuming that Cullumber exercises its option to purchase the equipment on December 31, 2021, prepare the journal…
Ivie Company uses leases as a method of selling its products. In 2020, Ivie Company completed construction of a passenger ferry. On January 1, 2020, the ferry was leased on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Annual lease payments do not include executory costs. Other terms of the agreement are as follows: Original cost of the ferry P9,000,000 Lease payment payable in advance P2,000,000 Estimated residual value P1,000,000 Implicit interest rate 12% Date of first lease payment January 1, 2020 Lease term 10 years 4. What is the profit on sale for 2020? 5. What is the interest income for 2020?
The lessor company signs a sales-type lease agreement on January 1, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $63,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $44,000. The lessor expects to earn a return of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 8%, 8 periods 1.85 0.54 10.64 5.75 6.21
AC Milan Sales and Service entered into a lease agreement to lease a fleet of six vehicles from FC Inter Motors. The term of the lease is five years and AC Milan makes annual payments of $30,000 per year beginning on 1 January 2019 (and then every 31 December through 31 December 2022). 1 January 2019 is also the lease commencement date. AC Milan does not guarantee any residual value in the lease agreement. AC Milan received $8,000 on 1 Jan 2019 as an incentive to sign the lease agreement and incurred initial direct costs in 2018 of $4,000 related to the lease that were recorded as prepaid assets. The estimated economic life of the vehicles is eight years and their fair value at lease commencement is $200,000. AC Milan is unaware of FC Inter's implicit rate, but AC Milan's incremental borrowing rate is 4% per year. There is no transfer of ownership at the end of the lease, nor is there a purchase option. The vehicles are not of a specialized nature. 1. What type of lease has AC Milan…
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $500,000. 4. Ten-Care agrees to pay all executory costs directly to a third party. 5. The lease contains no renewal or bargain purchase option. 6. The interest rate implicit in the lease is 10%. 7. The initial direct costs are insignificant and assumed to be zero. 8. It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Required: 1. Next Level Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the…
Asian Transit Marine Corporation (Lessee) leases a forklift from NDP Leasing Corp. (Lessor). The lease, signed on January 1, 2019, specifies that NDP grants right-of-use of the lift to Asian Transit. The lease terms are as follows: Lease is non-cancelable, term of four years, equal rental payments of P9,538.39 at the beginning of each year (annuity-due) Forklift has a fair value of P40,000, economic life of six years, and residual value of P8,000 (unguaranteed). Cost of forklift on NDP’s books is P30,000. No renewal options. Forklift reverts to NDP. Implicit rate of lessor is 8 percent and is known by Asian Transit. Required: Journal Entries for both the Lessor and the Lessee from lease commencement until last lease payment. Show solutions of arrived amounts in good form.
On January 1, 2020, Sitra Company leased equipment from National Corporation. Lease payments are $100,000, payable annually beginning on January 1, 2020 for 20 years. The lease is non-cancelable. The following information pertains to the agreement: 1. The fair value of the equipment on January 1, 2020 is $850,000. 2. The estimated economic life of the equipment was 25 years on January 1, 2020 with guaranteed residual value of $25,000. 3. The lease is non-renewable. At the termination of the lease, the equipment reverts to the lessor. 4. The lessor's implicit rate is 10% which is known to Sitra. Sitra's incremental borrowing rate is 12% (The PV of $1 for 20 periods at 10% is 0.14864 and the PV for an ordinary annuity of $1 for 20 periods at 10% is 8.51356). 5. Sitra uses straight-line method for depreciation. Instructions: A) Compute the present value of minimum lease payments. B) Prepare all necessary journal entries on the lessee's books for the year 2020.
On January 1, 2019, Intouch Corp. signed a five-year non-cancelable lease for machine with UWMA Company. The terms of the lease called for Intouch to make annual payments of P86,680 at the beginning of each year starting January 1, 2019. The machine has an estimated useful life of 6 years and a P50,000 unguaranteed residual value at the end of the fiveyear lease term. The machine reverts to the lessor at the end of five-year lease term. Intouch uses straight-line method of depreciation for all of its fixed assets. The implicit rate of the contract which is known by Intouch is 10%. The fair value of the machine on January 1, 2019 is P392,490. Intouch incurred P10,000 to install the machine. Intouch has an obligation to restore the machine to a condition suitable for use at the end of the lease term. Estimated cost of restoration is P20,000. (Use four decimal places for the PV factor) Applying IFRS 16, how much is the current and the non-current portion of the liability to be presented…