Cullumber Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annualpayments of $38,000 each, beginning September 1, 2023. In addition, Cullumber guarantees the lessor a residual value of $27,000 atlease end. The equipment has a useful life of seven years.Click here to view the factor table PRESENT VALUE OF 1.Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF 1.(a)Using (1) tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the capital lease and prepare Cullumber'sSeptember 1, 2023 journal entry assuming an interest rate of 12%. (List all debit entries before credit entries. Credit account titles areautomatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titlesand enter O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.)Account Titles and ExplanationEquipment under LeaseObligations under LeaseCash(To record inception of lease and first lease payment)DebitCredit38000

The objective of the question is to calculate the amount of the capital lease and prepare the…

Answered: Cullumber Corporation, which uses ASPE,…

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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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.
Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $78,000 under a 5-year lease on December 20, 2022. The lease commences on January 1, 2023, and Leewin will return the automobile to Bumble on December 31, 2027. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,700 on December 20, 2022. In addition, the lease agreement stipulates annual payments of $10,700, due on January 1 of 2023, 2024, 2025, 2026, and 2027. The implicit rate of the lease is 4% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2000.Assuming that this is classified as an operating lease, how much interest expense is recorded in 2023? Group of answer choices $1554 $2140 $0 $1982
sunland corporation, which uses ASPE, enters into a 6 year lease of equipment on september 1, 2023, that requires 6 annual payments of $30,000 each, beginning september 1, 2023. In addition, sunland gaurantees the lessor a residual value of $19,000 at lease end. the equipment has a useful life of seven years. Using tables, a financial calculator, or excel functions, calculate the amount of the capital lease and prepare Sunlands september 1, 2023 journal entry assuming an interest rate of 8%.
I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first annual payment was made on January 01, 2020. 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. At the end of the lease term, the machine will be returned to ANYARE SA COLLEGE LTD. A residual value in the amount of P5,000 has been guaranteed by I MISS HIGH SCHOOL INC. Interest implicit in the lease is 10% which is known to I MISS HIGH SCHOOL INC.Round present value factors to five decimal places. How much annual depreciation expense should I MISS HIGH SCHOOL INC. record? a. P24,628 b. P16,419 c. P23,378 d. P15,585
Acme Auto Repair entered into an agreement to lease equipment from Cromley Motor Products on July 1, 2022, The lease calls for five equal annual payments of $420,000, beginning July 1, 2023. Similar transactions have carried an 8% interest rate. At what amount would Acme would record the right-of-use asset? (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.)
Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. Date 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit January ,2024 January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date…
On January 1, 2024, Blue Co. recorded a right-of-use asset of $869,628 in a 10-year operating lease. The lease calls for ten annual payments of $120,000 at the beginning of each year. The interest rate charged by the lessor was 8%. What amount will Blue Co. record for amortization expense on December 31, 2024? O $60,030 O $64,832 O $86,963 $59,970 ring
The lessor company signs a lease agreement on December 31, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $87,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $42,000. The lessor expects to earn a return of 10% on its investment. The equipment has a useful economic life of 10 years. What is the amount of lease receivable the lessor will record on December 31, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 10%, 8 periods 2.14 0.47 11.44 5.33 5.87 10%, 10 periods 2.59 0.39 15.94 6.14 6.76
On April 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals of P1,742,174 are payable at the beginning of each lease year starting April 1, 2021. Elle is given the option to buy the machine for P250,000 on April 1, 2025, when the asset’s market price is expected to be P1,250,000. The asset’s useful life is 6 years, at the end of which the asset’s scrap value is expected to be P600,000. Elle uses the straight-line method to depreciate this asset. With an implicit interest rate of 10%, Elle appropriately recorded the machine and the related liability on April 1, 2021 at P6,245,450. Elle Company follows the calendar year as its accounting period. How much is the depreciation expense recognized by Elle for the years ended December 31, 2022 and December 31, 2021? A. P940,908 and P705,681 B. P1,411,363 and P1,058,522 C. P1,040,833 and P780,625 D. P1,561,363 and P1,171,022
At the beginning of 2024, VHF Industries acquired a machine with a fair value of $6,000,000 by signing a four-year lease, which is the expected useful life of the machine passing. The lease is payable in four annual payments of $1,892,825 at the end of each year. (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. What is the effective rate of interest implicit in the agreement? 2-4. Prepare the lessee's journal entries at the inception of the lease, the first lease payment at December 31, 2024 and the second lease payment at December 31, 2025. 5. Suppose the fair value of the machine and the lessor's implicit rate were unknown at the time of the lease, but that the lessee's incremental borrowing rate of interest for notes of similar risk was 11%. Prepare the lessee's journal entries for 2024. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Suppose the fair…
On January 1, 2020, Bacarra 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 sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, 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 unguaranteed, how much is cost of sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is the net income from the lease to be reported in 2020? Assume the residual value is unguaranteed and the fair…
Oriole Corporation enters into a 5-year lease of equipment on December 31, 2024, which requires 5 annual payments of $36,200 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $20,300 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $10,300. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Ark's 2024 and 2025 journal entries, assuming the implicit rate of the lease is 10% and this is known to Oriole. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For…

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