(a)Prepare a lease payments schedule for Mark’s payments (b)Show the journal entries for the year ended 30 June 2020
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Mark wanted to expand his business and so he arranged to lease a special machine from Twain. This machine would enable him to produce his special furniture in half the time he previously used to manufacture the furniture items. To obtain the item Mark agreed to make an annual payment of $39,000 in arrears for three years and agreed to make a guaranteed residual payment of $16,000. The lease commenced on 1 July 2019. The financial year ended 30 June each year. The residual value of the asset was $22,000 and the interest rate on the lease was 7%. The fair value of the machine was $120,307.
Required:
(a)Prepare a lease payments schedule for Mark’s payments
(b)Show the
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- On January 1, 2022, ABC leased an automobile for use their CEO. The following are the terms under the lease contract:- The lease contract requires ABC to make five annual payments of P400,000 beginning January 1, 2022. At the end of the lease term, December 31, 2026, ABC guarantees that the residual value of the automobile will total P250,000. - The property will be reverted to the lessor at the end of the lease term. - The estimated useful life of the automobile is four years and ABC uses straight-line method for all its assets. - ABC incremental borrowing rate is 8%. The rate is implicit in the lease, which is known to ABC Inc., at 11%.What amount of depreciation expense should be recognized by the ABC at the end of December 2022?How much is the Lease liability to be reported in the statement of Financial Position for the year ended December 31, 2022 by ABC?Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $280,000, beginning immediately. The residual value of $200,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $120,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $1,800,000 at the commencement of the lease. Note: Round your answers to the nearest whole dollar. Date 1) Dec. 31 Account Name: Dr. Cr. 0 0 0 0 0 0 0 0 To derecognize asset and record investment in lease 2) Dec. 31 0 0 00 To record receipt of lease paymentIndiana Jones Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires six annual payments of $40,000 each, beginning December 31, 2019. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at the end of the lease. However, Indiana Jones believes it is probable that the expected residual value at the end of the lease term will be $10,000. The equipment has a useful life of 6 years. Prepare Indiana Jones' December 31, 2019, journal entries, assuming the implicit rate of the lease is 6% and this is known to Indiana Jones.
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- Ayayai Corporation leased equipment to Kingbird, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,151 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $9,900, a book value of $7,900, and Ayayai expects a residual value of $7,400 at the end of the lease term. Ayayai set the lease payments with the intent of earning a 4% return, though Kingbird is unaware of the rate implicit in the lease and has an incremental borrowing rate of 6%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Prepare all necessary journal entries for Kingbird in 2020On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. • Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $30,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. The expected useful life of the asset is nine years, and its fair value is $225,000. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 5%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry, if any, on January 1 and on December 31 of…On January 1, 2016, Fiona sold some land to another company and immediately leased it back again. The sale price was $13,420, and the leaseback requires $2,000 payments at the end of each of the next ten years. An interest rate of 8% was used. The cost of the land on Fiona's books was $10,000. The title to the land will be transferred back to Fiona at the end of the lease. Required: Prepare all 2016 journal entries on the books of Fiona.
