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 a 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 0 decimal places eg. 5,275.) Date //1/20 2/31/20 2/31/21 2/31/22 $ Rent Receipt/ Payment Interest Revenue/ Expense $ $ Reduction of Principal $ Receivable/Lia 100

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 a 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 0 decimal places eg. 5,275.) Date //1/20 2/31/20 2/31/21 2/31/22 $ Rent Receipt/ Payment Interest Revenue/ Expense $ $ Reduction of Principal $ Receivable/Lia 100

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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Sandhill, Inc. manufactures machinery used in the mining industry. On January 2, 2025, it leased equipment with a cost of $560000 to Blue Co. The 5-year lease calls for a 20% down payment and equal annual payments at the end of each year. The equipment has an expected useful life of 5 years. If the selling price of the equipment is $860000, and the rate implicit in the lease is 8%, what are the equal annual payments? 8%, 5 periods 10%, 5 periods O $181493 O $159550 O $172314 O $215393 PV Annuity Due 4.31213 4.16987 eTextbook and Media PV Ordinary Annuity 3.99271 3.79079 PV Single Sum 0.68058 0.62092
Adams Storage and Appraisal leased equipment to OAC Corporation for an eight-year period, at which time possession of the leased asset will revert back to Adams. The equipment cost Adams $32 million and has an expected useful life of 11 years. Its normal sales price is $45 million. The present value of the minimum lease payments for both the lessor and lessee is $40 million. The first payment was made at the inception of the lease. How would OAC classify this lease if it prepares its financial statements using IFRS? Why?
On January 2, 2021, White company leased a machine by signing a 4-year lease contract. Annual rentals of P600,000 are payable every beginning of the year starting January 2, 2021. White did not guarantee the residual value of P100,000 at the end of the lease term. The asset’s useful life is estimated to be 5 years, at the end of which, the asset’s residual value is expected to be P50,000. White uses straight-line method of depreciation. The interest implicit in the lease is 10%. (Round off the PV factor to four decimal places)How much depreciation was recorded by White on the right-of-use asset for the year 2021?
Abbott Equipment leased a protein analyzer to Werner Chemical, Incorporated, on September 30, 2024. Abbott purchased the machine from NutraLabs, Incorporated, at a cost of $6 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. Abbott's implicit interest rate is 12%. The useful life of the equipment is five years. 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: What pretax amounts related to the lease would Abbott report in its balance sheet on December 31, 2024? What pretax amounts related to the lease would Abbott report in its income statement for the year ended December 31, 2024? What pretax amounts related to the lease would Abbott report in its statement of cash flows for the year ended December 31, 2024? Complete this question by…
Sandhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on January 1, 2025. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable. Sandhill set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sandhill at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (for calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable eTextbook and Media List of Accounts
Sheridan Company, a machinery dealer, leased a machine to Sunland Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2025. Sheridan had purchased the machine during 2024 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $
NutraLabs, Incorporated, leased a protein analyzer to Werner Chemical, Incorporated, on September 30, 2024. • NutraLabs manufactured the machine at a cost of $5 million. • The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. • NutraLabs' implicit interest rate is 12%. • The useful life of the equipment is five years. 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. Determine the price at which NutraLabs is "selling" the equipment (present value of the lease payments) on September 30, 2024 2. What pretax amounts related to the lease would NutraLabs report in its balance sheet on December 31, 2024? 3. What pretax amounts related to the lease would NutraLabs report in its income statement for the year ended December 31, 2024? 4. What pretax amounts related…
Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $32,055 at the beginning of each year. The first payment is received on January 1, 2025. Wildhorse had purchased the machine during 2024 for $129,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. Click here to view factor tables. (a) * Your answer is incorrect. Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable 256440
Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required(Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing Company. c)…
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement calls for annual payments in the amount of $17,500 on December 31 of each year beginning on December 31, 2018. Rumsfeld has the option to purchase the machine on December 31, 2021, for $21,500 when its fair value is expected to be $31,500. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this lease is 8%. n/i 1 period, 8% 2 periods, 8% 3 periods, 8% PV of $1 PV, ordinary annuity PV, annuity due 0.92593 0.92593 1.00000 0.85734 1.78326 1.92593 0.79383 2.57710 2.78326 Required: 1. Calculate the amount to be recorded as a right-of-use asset and the associated lease liability. 2. Prepare an amortization schedule for this lease. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the amount to be recorded as a right-of-use asset and the associated lease liability.…
American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Prepare the appropriate entries related to the lease…
Charlotte Corp., a machinery dealer, leased a machine to Eleanor Corp. on January 1, 2022. The lease is for an 8-year period, is noncancelable and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2022. Charlotte had purchased the machine during 2021 for $160,000. The FMV of the machine is 200,000. The present value of the minimum lease payments is also $200,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Charlotte. Charlotte set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Charlotte at the termination of the lease. Required: What type of lease is this for Charlotte (lessor) and why Prepare all of Charlotte’s journal entries for 2022.