Boyce Company leased a music studio from Justine company on a 6-year lease term at P250,000 annual rental payable in advance. Justine offered Boyce the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Boyce did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation) How much loss on failure to exercise the bargain purchase option was reported by Boyce?

Boyce Company leased a music studio from Justine company on a 6-year lease term at P250,000 annual rental payable in advance. Justine offered Boyce the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Boyce did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation) How much loss on failure to exercise the bargain purchase option was reported by Boyce?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

See similar textbooks

Similar questions

Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
Gary Company leased a music studio from Prada company on a 6-year lease term at P250,000 annual rental payable in advance. Prada offered Gary the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Gary did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation)How much loss on failure to exercise the bargain purchase option was reported by Gary?
Company is leasing production equipment where the estimated useful life of the equipment is 11 years, and the lease term is 8 years. As per the current market, the fair value of the equipment is $14 million, while the lease rentals are agreed to be $2.45 million payable at the beginning of each year. If an appropriate discount rate is 12.25%, determine the nature of lease.
At the beginning of the year, Cazenovia, Inc. entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for 5 years at year-end.The implicit interest rate is 5% and the company classified the lease as a finance lease. What is the total expense if straight-line amortization is used for the leased asset?Round answer to the nearest whole number.$
Kit Company leased equipment at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Kit is given the option to purchase the asset for P75,000 at the end of the lease term and Kit is reasonably certain to exercise this option. The appropriate interest rate is 12%. Present value of 1 at 12% for 5 periods is 0.5674. Present value of an annuity due of 1 at 12% for 5 periods is 4.0373. What is the capitalized cost of right of use equipment? a. 225,000 b. 300,000 c. 224,234 d. 189,679
On 1/1/21, Hall Inc entered into a lease agreement with Oates Co. Hall leased a machine from Oates for 9 years. The estimated useful life of the machine is 9 years. At the end of the 9 year lease term, ownership of the machine will transfer back to Oates. The lease agreement calls for annual payments of $150,000, to begin on 1/1/21. The borrowing rate is 10%. The present value of the lease payments is $949,500. Show all computations. Prepare a lease amortization table for 1/1/21, 1/1/22 and 1/1/23.. Prepare journal entries for Oates (lessor sales type lease) for 1/1/21, 12/31/21, 1/1/22, 12/31/22 &1/1/23.
Louis Company leased a machine from Millennium Corporation on January 1, 2010. The first annual payment was made on January 1, 2011. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. The machine will be returned to Millennium Corporation at the end of the lease term and Louis Company guarantees a residual value of P5,000. Interest implicit in the lease is 10%, which is known to Louis. If Millennium Corporation recorded the net investment in lease higher than the liability initially recorded by Louis Company, the variance could be due to a. initial direct costs. b. an unguaranteed residual value. c. both A and B d. neither A nor B.
Louis Company leased a machine from Millennium Corporation on January 1, 2010. The first annual payment was made on January 1, 2011. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. The machine will be returned to Millennium Corporation at the end of the lease term and Louis Company guarantees a residual value of P5,000. Interest implicit in the lease is 10%, which is known to Louis. Assume that on January 1, 2014, the lease payment included an amount of P5,000 for exceeding a limit for machine usage hours specified in the lease agreement. Louis Company would account for this charge as a. an expense in its 2013 statement of comprehensive income. b. an expense in its 2014 statement of comprehensive income. c. a reduction in the lease liability d. additional executory costs
ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a finance lease. The cost of the asset is $129,000. The lease contains a bargain purchase option that is effective at the end of the fifth year. The expected economic life of the asset is 10 years. The lease term is five years. The asset is expected to have a residual value of $2,600 at the end of 10 years. Using the straight-line method, what would Best record as annual amortization?
On January 1, 2018, This Co. leased an asset with fair value of P800,000 from Joyce Co. for a lease term of 6 years. The lease specifies equal annual payments beginning on January 1, 2018. The lessee guarantees a P100,000 residual value of the asset at the end of the lease term. The rate implicit on the lease is 9%. How much is the annual lease payment?
ABC Company leased equipment to Best Corporation under a lease agreement that qualifies as a direct finance lease. The cost of the asset is OMR 22,000. The lease contains a bargain purchase option that is effective at the end of the fifth year. The expected economic life of the asset is five years. The lease term is 5 years. The asset is expected to have a residual value of OMR 2,000 at the end of ten years. Using the straight-line method, what would Best record as annual depreciation? Select one: a. OMR 2,000 b. OMR 4,500 c. OMR 5,000 d. OMR 4,000
On January 1, 2020, Narra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. Assume it is a direct finance lease with an implicit rate of 12% and the residual value is guaranteed, how much is the interest income for 2020? Assume it is a direct finance lease with an implicit rate of 12% and the residual value is unguaranteed, how much is the net lease receivable as of yearend 2022? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is guaranteed, how much should be credited to sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is guaranteed, how much is cost of sales resulting from the lease? Assume it is a sales-type lease with an…