Assume IBM leased equipment that was carried at a cost of $150,000 to Blossom Company. The term of the lease is 5 years beginning December 31, 2024, with equal rental payments of $30, 100 beginning December 31, 2024. The fair value of the equipment at commencement of the lease is $129, 795. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 8%, no bargin purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Prepare IBM's December 31, 2024, journal entries at commencement of the lease.
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Assume IBM leased equipment that was carried at a cost of $150,000 to Blossom Company. The term of the lease is 5 years beginning December 31, 2024, with equal rental payments of $30, 100 beginning December 31, 2024. The fair value of the equipment at commencement of the lease is $129, 795. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 8%, no bargin purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Prepare IBM's December 31, 2024,
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- Linda Leasing Company signs an agreement on January 1, 2025, to lease equipment to Swifty Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. 3. The fair value of the asset at January 1, 2025, is $72,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $12,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $21,250.90 to the lessor, beginning on January 1, 2025. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Swifty uses the straight-line depreciation method for all equipment. Click here to view factor tables. Prepare all of the journal entries for the lessee for 2025 to record the lease agreement, the lease payments, and all expenses related to this lease.…Crane Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $85,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has à 3-year useful life and no residual value. The lease was signed on January 1, 2020. Crane expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Click here to view factor tables. (b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Date /1/20 12/31/20 2/31/21 2/31/22 Rent Receipt/ Payment Interest Revenue/ Expense $ Reduction of Principal $ Receivable/Lia 1 SUPPORTFederated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. • The lease agreement specified annual payments of $44,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. • The company had the option to purchase the machine on December 30, 2026, for $53,000 when its fair value was expected to be $68,000, a sufficient difference that exercise seems reasonably certain. • The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 9%. 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. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…
- Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured theequipment at a cost of $200,000. The equipment has a fair value of $260,000.Information related to the lease appears below:Lease term 5 yearsFirst lease payment January 1, 2023Subsequent lease payments December 31, 2023, 2024, 2025, 2026Economic life of the equipment 6 yearsEstimated value of equipment at end of economic life $0Purchase option, reasonably expected to be exercised by Oscar $20,000Implicit and incremental borrowing rate 8% Prepare the entries to record the lease and the first payment for both the lessee and the lessor onJanuary 1, 2023.Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $85,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $27,911 to the lessor, beginning on January 1, 2020. 5. The lessee’s incremental borrowing rate is 5%. The lessor’s implicit rate is 4% and is unknown to the lessee. 6. Tamarisk uses the straight-line depreciation method for all equipment. Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.) TAMARISK…
- Grygiel Company leases a nonspecialized machine with a fair 20 value of $50,000 to Baker Company. The lease has a life of 6 years and requires a $10,000 payment at the end of each year. The lease does not include a transfer of ownership nor a bargain purchase option, and life of the lease is less than a major part of the expected economic life of the machine. It is probable at Grygiel will collect lease payments plus any amount necessary to satisfy a residual value guarantee. Round your answers to the nearest dollar. 1. Next Level If the interest rate implicit lease is 10%, compute the machine's expected residual value. 2. Next Level If the residual alue is guaranteed by Baker, how would each company classify the lease? 3. Next Level If the residual value is not guaranteed by Baker but is instead guaranteed by a third party,how would each company classify the lease?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…Wells Leasing Company signs an agreement on January 1. 2020, to lease equipment to Manchester Company. The following information relates to this agreement. The term of the non-cancellable lease is 6 years with no renewal option. 1. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is S250,000. The fair value of the asset at January 1, 2020, is $250,000. The asset will revert to the lessor at the end of the lease term, at which 3. time the asset is expected to have a residual value of $25000, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on 4. January 1, 2020. 5. Collectability of the lease payments by Windsor is probable. A. Assuming the lessor desires a 6o rate of return on its investment, calculate the amount of the annual rental payment required.
- On January 1 2020, Zincorne Corp. entered into an agreement to lease a specialized machine from Lessor Inc. The machinery has a current fair market value of $150,000. Details of the lease contract follow: the lease term is 5 years the economic life of the equipmement is 6 years zincorne has the option to purchase the equipment for $10,000 at the end of the lease term. The estimated value of the equipment at this time is $27,000 the implied interest rate in the lease is 8% but is not known to zincorne nor is it readily determinable zincorne's current IBR is 9% annual payments of $33,200 commence on Jnauary 1 2020 zincorne follows IFRS and has a December 31 year end What is the balance of the lease liability at the end of december 31?The following facts pertain to a non-cancelable lease agreement between Wildhorse Leasing Company and Windsor Company, a lessee. Commencement date June 1, 2025 Annual lease payment beginning with June 1, 2025 $19,998.50 Bargain purchase option price at end of lease term $7,000.00 Lease term Economic life of leased equipment (no salvage value) Lessor's cost Fair value of asset at June 1, 2025 4 years 12 years $56,000 $78,999 Lessor's implicit rate (known to lessee) 6% Lessee's incremental borrowing rate 69 The collectibility of the lease payments by Wildhorse is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) (b) (c) Your answer is partially correct. Prepare a lease amortization schedule for Windsor for the 4-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) WINDSOR COMPANY (Lessee) Date 6/1/25 $ 6/1/25 6/1/26 6/1/27 6/1/28 5/31/29 Annual Lease Payment Plus BPO $ Lease…Wildhorse, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $434152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no salvage value. Wildhorse, Inc.’s incremental borrowing rate is 9% and the rate implicit in the lease (which is known by Wildhorse, Inc.) is 7%. Wildhorse, Inc. uses the straight-line method to amortize similar assets. What is the amount of amortization expense recorded by Wildhorse, Inc. in the first year of the asset’s life? PV Annuity Due PV Ordinary Annuity 7%, 4 periods 3.62432 3.38721 9%, 4 periods 3.53129 3.23972 ANSWER CHOICES: 0 because the asset is amortized by Wildhorse Company $383279 $367641 $393377
