Company A sells a machine to Company B for its fair value of $ 2,000,000 on January 1,2018- Company A immediately leases the machine back for 5 yearsThe useful life of the machine is 7 years- The implicit rate is 7% and the incremental borrowing rate is 6% (assume both rates areknown to lessee)- The machine was recorded on Company A's books at$ 1,400,000- The residual value at the end of 5 years is expected to be $ 400,000 and is not guaranteedAssuming the annual payments are at the beginning of the period are what is the lease paymentCompany B would charge Company A?- Using IFRS give the initial journal entries for Company B- Using ASPE give the initial journal entries for Company B- Using IFRS give the initial journal entries for Company A- Using ASPE give the initial journal entries for Company A

The Sale and Leaseback transaction has been resulted in Finance Lease, as the lease term covers the…

Company A sells a machine to Company B for its fair value of $ 2 Company A immediately leases the machine back for 5 years The useful life of the machine is 7 years The implicit rate is 7% and the incremental borrowing rate is 69 known to lessee) The machine was recorded on Company A's books at$ 1,400,00 - The residual value at the end of 5 years is expected to be $ 400,

Company A sells a machine to Company B for its fair value of $ 2 Company A immediately leases the machine back for 5 years The useful life of the machine is 7 years The implicit rate is 7% and the incremental borrowing rate is 69 known to lessee) The machine was recorded on Company A's books at$ 1,400,00 - The residual value at the end of 5 years is expected to be $ 400,

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

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Company A sells a machine to Company B for its fair value of $ 2,000,000 on January 1,2018
- Company A immediately leases the machine back for 5 years
The useful life of the machine is 7 years
- The implicit rate is 7% and the incremental borrowing rate is 6% (assume both rates are
known to lessee)
- The machine was recorded on Company A's books at$ 1,400,000
- The residual value at the end of 5 years is expected to be $ 400,000 and is not guaranteed
Assuming the annual payments are at the beginning of the period are what is the lease payment
Company B would charge Company A?
- Using IFRS give the initial journal entries for Company B
- Using ASPE give the initial journal entries for Company B
- Using IFRS give the initial journal entries for Company A
- Using ASPE give the initial journal entries for Company A

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Subject:- accounting