AssignmentGradebookORIONDownloadable eTextbookCALCULATORFULL SCREENPRINTER VERSIONBACKNEXTBrief Exercise 21A-4Tamarisk Company leases equipment for 8 years with an annual rental of $1,600 per year or $12,800 in total. General Leasing (the lessor) agrees to provide Tamarisk with $300 for the first 2 yearsof the lease to defray needed repairs to the equipment.Determine the lease payments that Tamarisk will pay for the first 3 years of the lease agreement.Lease paymentsLINK TO TEXTLINK TO TEXTQuestion Attempts: 0 of 5 usedSAVE FOR LATERSUBMIT ANSWERW

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

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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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Brief Exercise 21A-6 Metlock Company leased equipment from Costner Company, beginning on December 31, 2016. The lease term is 6 years and requires equal rental payments of $24,035 at the beginning of each year of the lease, starting on the commencement date (December 31, 2016). The equipment has a fair value at the commencement date of the lease of $120,000, an estimated useful life of 6 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Metlock’s 2016 and 2017 journal entries, assuming Metlock depreciates similar equipment it owns on a straight-line basis.
Exercise 15-14 (Algo) Lessor; operating lease; effect on financial statements [LO 15-4] At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. • The lease agreement specifies annual payments of $21,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. • The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method. . Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $76,604. • Crescent seeks a 8% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. 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)…
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QUESTION 2 On January 1, 20X1, Dynamic entered into a two-year lease for a lorry. The contract contains an option to extend the lease for a further year. Dynamic believes that it is reasonably certain to exercise this option. Lorries have a useful economic life of ten years. Lease payments are $10,000 per year for the initial term and $15,000 per year for the option period. All payments are due at the end of the year. To obtain the lease, Dynamic incurs initial direct costs of $3,000. The lessor immediately reimburses $1,000 of these costs. The interest rate within the lease is not readily determinable. Dynamic's incremental rate of borrowing is 5%. Present Value Table Year Discount rate 5% 1 0.952 2 0.907 3 0.864 Required: Calculate the initial carrying amount of the lease liability and the right-of-use asset and provide the double entries needed to record these amounts in Dynamic's financial records.
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Problem 3 On January 1, 2022, ABC Company signed into a leasing arrangement with XYZ Company for a machine that was valued at P3,500,000 in ABC's financial records. The lease runs through December 31, 2028 and every year on January 1st, payments of P855,300 are required. The seven percent interest rate set in the lease is deemed reasonable and appropriate compensation for ABC's use of its money. The machine will have a 7-year life, no residual value, and will be depreciated on a straight line basis, according to XYZ. The lease is designed to be a sales lease. For the fiscal year ending December 31, 2022, determine the following: a. ABC's gross income from sales b. ABC's interest income c. ABC's pretax total income from the lease
Questions 1-3 On 1/1/2012 ABC, Inc. enters into a 20-year non-cancelable lease for a piece of machinery owned by XYZ, Inc. The lease calls for annual payments of $20,000, payable at the beginning of each year of the lease (i.e. first payment due on 1/1/2012). At the end of the lease, the right to use the machine transfers back to XYZ. ABC, Inc. declined the choice to purchase the machine outright for $800,000, and the economic life of the machine is believed to be 30 years. There is also an option to renew the lease for an additional 10 years at a reduced rate of $19,000. This does not represent a bargain renewal option that ABC, Inc. is reasonably certain to use. ABC, Inc. uses a 5% discount rate to calculate present values, and generally uses straight line depreciation to depreciate machines assuming a 0% salvage value. In addition, ABC, Inc. spends $20,000 to customize the machinery for use in their factory. They believe that this customization has a useful life of 10 years. What…
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Problem 16-21 Financial statement effects of leases The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 18,500 Year 2: $ 23,500 Year 3: $ 28,500 Year 4: $ 33,500 An appropriate discount rate is 7 percentage, yielding a present value of $86,637.a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? a-2. If the lease is an operating lease, what will be the initial value of the lease liability? a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1? a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at…
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