Company Inc. enters into a 10-year finance lease at the beginning of 2021 for a total of $250,000. The annual lease payment is $25,000 (payable at the end of each year) and the rate implicit in the lease is 5%. No initial direct costs are incurred. How much interest expense should be recognized in 2021?
Q: Lagace Ltd. entered into a lease on June 1, 2020. The lease term is six years and requires annual…
A: The concept of "capitalized amount" refers to the total value assigned to an asset or expense when…
Q: On June 30, 2024, Clark, Incorporated leased warehouse equipment from Woodward, Incorporated. The…
A: The present value of lease payments is determined by discounting, which is a method that involves…
Q: On January 1, 2024, Zhang Corporation entered into a four-year operating lease. The payments were as…
A: The term "Total Lease" is not a standard or widely recognized term in the context of leasing. It's…
Q: On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of $16,000 per…
A: The lessee's income statement shows the amortization expenditure associated with the leased asset as…
Q: On January 1, 2019, Pharoah Inc., a construction company, leased an excavator from Leaselt Inc. The…
A: The right of use asset is calculated as present value of annual lease payments and residual value at…
Q: Team, Inc. leased machinery with a fair value of P250,000 from Win Company on December 31, 2019. The…
A: The lease liability is the present value of lease payments at company's incremental borrowing rate.
Q: On January 1, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information…
A: Minimum Lease Payment: It is the rental payments during the lease period. These annual rental…
Q: On December 31, 2019, Lewis Corp. (Lewis), a publicly accountable entity, leased a tractor from Jade…
A: Right of Use Asset-Lease: It is a right of lessee to utilize a leased item(property or equipment)…
Q: On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000…
A: The lease is a type of financing in which the owner of the asset provides the right to use the asset…
Q: On January 1, 2021, Wise Corporation leased equipment to Slim Company. The lease term is eight…
A: Interest revenue refers to an amount that is being earned from the amount of investment made by the…
Q: On January 1, 2020, ABC Company enters into a 4-year lease of office equipment. The rent in 2020 is…
A: As per IFRS 16, practical expedient is used when the measurement of Right of use of the asset on…
Q: On January 1, 2021, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a…
A: A lease is a contract in which a owner of an asset (the lessor) offers the user of that asset(the…
Q: How much is the balance of the lease liability as of December 31, 2021?
A: As per the provisions, variable lease payments that are linked to the index are considered for…
Q: A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term,…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation.…
A: Lease is a financial arrangement in which one party agree to let the other party use its asset. In…
Q: January 1, 2020, Eduardo Company leased two automobiles for executive equires Eduardo Company to…
A: In finance lease the lessee has the option to buy the equipment at the end of lease period. The…
Q: December 31, 2021, Rafferty Company leased equipment under a finance lease. Annual lease payments of…
A: The question is related to Accounting for Lease. The question is related to Finance lease. The lease…
Q: On January 1, 2021, Nets Company entered into a lease contract with Denver Company for a new…
A: Lease refers to an agreement made between 2 parties for using the assets that are provided by the…
Q: On June 30, 2021, Fly-By-Night Airlines leased a jumbo jet from Boeing Corporation. The terms of the…
A: Lease is a financial arrangement in which one party agrees to let the other party use its asset in…
Q: On January 1, 2020, Blaugh Company signed a long-term lease for an office building. The terms of the…
A: A lease is a written agreement between two parties. Party A grants Party B the right to use its…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation.…
A: Present value = $4,900,002 Pretax amount for liability = $3,906,074 Pretax amount for…
Q: . How much is the balance of the lease liability as of December 31, 2021?
A: Variable lease payment linked to the index is considered for lease liability calculation. Hence we…
Q: STL enters into a 5-year lease of an item of plant on January 1, 2022. The annual rentals are P11.5…
A: Lease Liability It is important to calculate the present value of the lease which can be determine…
Q: June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The…
A: Lease Accounting -In a lease, one or more payments are made in exchange for the lessor agreeing to…
Q: On January 1, 2021, Maroon Company entered into a five-year nonrenewable operating lease, commencing…
A: The operating lease is a lease agreement where the lessee takes the assets on rent from the lessor…
Q: Co. enters into a 4-year lease of office equipment. The rent in 2021 is P10,000 and shall increase…
A:
Q: Timmer Company signs a lease agreement dated January 1, 2019,that provides for it to lease equipment…
A: Lease refers to the contractual agreement where user pay the owner for using the asset and the…
Q: Lessee Company enters into a lease on January 1, 2024, that is accounted for as a finance lease. The…
A: The amount of lease liabilities is calculated by discounting future lease payments to present value…
Q: On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment…
A: Lease accounting is the process of recording the lease activities to show the financial impact of…
Q: What is the interest expense for the calendar year 2022? (round off answer to the nearest WHOLE…
A: The interest expense for year 2022 will be calculated on the opening balance as on January 1, 2022…
Q: On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is…
A: Lease agreement: Lease agreement can be defined as the legal agreement between the lessor and…
Q: n June 30, 2024, Blue, Incorporated leased a machine from Big Leasing Corporation. The lease…
A: Lease gives right to use the equipment by payment of periodic lease payments and there is no need of…
Q: On January 1, 2019, Nintendo Company enters into a 10-year lease of machinery with annual lease…
A: The lease liability is recognized at the PV of lease payment over the lease period. The lease…
Company Inc. enters into a 10-year finance lease at the beginning of 2021 for a total of $250,000. The annual lease payment is $25,000 (payable at the end of each year) and the rate implicit in the lease is 5%. No initial direct costs are incurred. How much interest expense should be recognized in 2021?
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
- Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.Lessee Company enters into a lease on January 1, 2024, that is accounted for as a finance lease. The lease calls for quarterly payments of $20,000, beginning on January 1, 2024, and continuing for 5 years. The last payment is due on October 1, 2028. The lease has an implicit annual interest rate of 10%. The present value of an annuity due at 10% per period for 5 periods is 4.170; the present value of an annuity due at 2.50% per period for 20 periods is 15.979. What amount will Lessee report as a lease payable (not including accrued interest) in its balance sheet on December 31, 2024? Multiple Choice $416,987 $261,102 $319,580 $247,630 $416,987On January 1, 2020, Blaugh Company signed a long-term lease for an office building. The terms of the lease required Blaugh Company to pay P100,000 annually beginning December 31, 2020, and continuing each year for 30 years. On January 1, 2020, the present value of the lease payments is P1,125,000 at the 8% interest rate implicit in the lease. What amount should be reported as lease liability on December 31, 2020?
- On January 1, 2019, BTS Company enters into a 10-year lease of machinery with annual lease payments of P800,000 payable at the beginning of each year. The contract specifies that the lease payments will increase every two years on the basis of the increase in consumer price index for the preceding 24 months. The consumer price index at the commencement date is 140. The rate implicit in the lease is not readily determinable. Lessee’s incremental borrowing rate is 8% per annum, which reflects the fixed rate at which lessee could borrow an amount similar to the value of the right-of-use asset, in the same currency, for a ten-year term and with similar collateral. At the beginning of third year (January 1, 2021) of the lease, the consumer price index is 160. How much is the balance of the lease liability as of December 31, 2021?On January 1, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information on the lease is as follows: Cost of equipment - P320,183 Useful life of equipment - 5 years Lease term - 4 years Annual rental payable at the beginning of each year? Company A incurred initial direct costs of P20,000 in negotiating the lease. The implicit interest rate is 12%. How much is the annual rent?What is the lease liability immediately after the first required payment?
- On January 1, 2019, Lotte Company enters into a 10-year lease of machinery with annual lease payments of P800,000 payable at the beginning of each year. The contract specifies that the lease payments will increase every two years on the basis of the increase in consumer price index for the preceding 24 months. The consumer price index at the commencement date is 140. The rate implicit in the lease is not readily determinable. Lessee’s incremental borrowing rate is 8% per annum, which reflects the fixed rate at which lessee could borrow an amount similar to the value of the right-of-use asset, in the same currency, for a ten-year term and with similar collateral. At the beginning of third year (January 1, 2021) of the lease, the consumer price index is 160. How much is the balance of the lease liability as of December 31, 2021? P5,674,397 P3,698,303 P4,226,634 P5,140,9201. On January 1, 2021, ABC Co. enters into a 4-year lease of office equipment. The rent in 2021 is P10,000 and shall increase by 20% annually starting January 1,2022. Rentals are payable at the end of each year. ABC Co. pays the lessor a lease bonus of P5,000 on January 1, 2021. ABC Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets. How much is the lease expense in 2021? O P14,670 P11,603 O P12,853 P10,000On December 31, 2019, Lewis Corp. (Lewis), a publicly accountable entity, leased a tractor from Jade Leasing Corp. (JLC). The lease term is for seven years, after which the asset must be returned to JLC. The annual lease payments are $45,000, with the first payment due on December 31, 2019. The interest rate implicit in the lease is 6% and is known to Lewis. Lewis’s incremental borrowing rate is 5%. The guaranteed residual value of the tractor at the end of the lease term is $50,000, and Lewis expects that the tractor’s fair value when returned to JLC will be $30,000. Required: Prepare all journal entries required by Lewis for the tractor lease on December 31, 2019, and for the year ended December 31, 2020
- Date Account Titles and Explanation Debit Credit Jan. 1, 2019 Right-of-Use Asset Lease Liability Cash Dec. 31, 2019 Depreciation Expense Accumulated Depreciation - Right-of-Use Asset (To record depreciation) Interest Expense Lease Liability (To record interest)On January 1, 2021, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a sales-type lease. Calloway paid $300,000 for the machine and is leasing it to Zone for $33,000 per year, an amount that will return 8% to Calloway. The present value of the lease payments is $300,000. The lease payments are due each January 1, beginning in 2021. What is the appropriate interest entry on December 31, 2021? Multiple Choice Cash Interest revenue. Cash Interest receivable Interest receivable Interest revenue. Interest receivable Interest revenue 24,000 21,360 21,360 24,000 24,000 21,360 21,360 24,000On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of S16,000 per year for 4 years. The expected life of the truck is 5 years, and the first payment will be made immediately. Flackmon could obtain a loan for a similar amount at a rate of 8% per year. Required: A. Record the lease liability and the first payment on January 1, 2021. B. Record the amortization on the leased asset for 2021. C. Record interest for 2021 on the lease. D. Record the lease payment on January 1, 2022. Your answers to this open-ended assignment should be placed in the space below this line. A Date Account Name Debit Credit Jan. 1, 2021 1-Jan-21 B Date Account Name Debit Credit Dec. 31, 2021 C Date Account Name Debit Credit Dec. 31, 2021 D Date Account Name Debit Credit Jan. 1, 2022
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)