Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteedto the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%.Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value ofthe equipment is $450,000 at the commencement of the lease.• Note: Round your answers to the nearest whole dollar.Date1) Dec. 31Account NameLease ReceivableCost of Goods SoldSales RevenueDr.30,000Cr.0xv450,000vсx0450,000InventoryTo derecognize asset and record investment in lease2) Dec. 31 CashLease ReceivableTo record receipt of lease payment70,000D070,000✔

A sales-type lease is a lease arrangement where the lessor effectively sells the leased asset to the…

Date Account Name Dr. Cr. 1) Dec. 31 Lease Receivable 30,000 Cost of Goods Sold 450,000 Sales Revenue Inventory To derecognize asset and record investment in lease 2) Dec. 31 Cash Lease Receivable To record receipt of lease payment 450,000 70,000 70,000

Date Account Name Dr. Cr. 1) Dec. 31 Lease Receivable 30,000 Cost of Goods Sold 450,000 Sales Revenue Inventory To derecognize asset and record investment in lease 2) Dec. 31 Cash Lease Receivable To record receipt of lease payment 450,000 70,000 70,000

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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Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $280,000, beginning immediately. The residual value of $200,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $120,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $1,800,000 at the commencement of the lease. Note: Round your answers to the nearest whole dollar. Date 1) Dec. 31 Account Name: Dr. Cr. 0 0 0 0 0 0 0 0 To derecognize asset and record investment in lease 2) Dec. 31 0 0 00 To record receipt of lease payment
Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. rate of interest of 7% Prenare the leccor's inurnal entries on December 31 to record the (1) leace receivable and (2) receint of the first navment assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $450,000 at the commencement of the lease. N Note: Round your answers to the nearest whole dollar. = Nare' koung your answers in the nearest wanie nnuar Date TIDEL. SI 1) Dec. 31 2) Dec. 31 Account Name To derecognize asset and record investment in lease To record receipt of lease payment ======== Dr. Cr.
The lessor company leases a building to the lessee company on 1/1/2021. The lessee will make ten annual rental payments of $77,000 at the beginning of each year, starting from 1/1/2021. Both parties expect a residual value of $17,000 at the end of the lease term, though this amount is not guaranteed. The lessor company set the lease payments with the intent of earning a 10% return, and the lessee is aware of this rate. Suppose the lessee incurs initial direct costs of $4,360 related to the lease. What is the amount for Right-of-Use Asset the lessee will record on 1/1/2021? (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%, 10 periods 2.59 0.39 15.94 6.14 6.76
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Vaughn Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $56,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Vaughn's incremental borrowing rate is 8%. Vaughn is unaware of the rate being used by the lessor. At the end of the lease, Vaughn has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Vaughn uses the straight-line method of depreciation on similar owned equipment. Prepare the journal entries, that Vaughn should record on December 31, 2022. (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. Round answers to O decimal places e.g.…
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On January 1 of Year 1, Wayne Inc. signed an eight-year lease for office space for $48,000 annually due each January 1, with the first payment due immediately. Wayne has the option to renew the lease for an additional four-year period on or before January 1 of Year 9, at market lease rates at the time of renewal. The remaining economic life of the office is 30 years. Wayne Inc. is not aware of the implicit rate of the lease but has an incremental borrowing rate of 7%. Wayne Inc. paid $2,000 on January 1 of Year 1 for initial direct costs. Required a. How would Wayne Inc. classify the lease? ◆
A lessor leased out an office space for 5 years on January 1, 2020. The lease was properly accounted for as an operating lease. The rental payment are as follows: first to second year - P300,000 per month third to fifth year - P36,000 per month The lease contract provides for a 6-month advance and 1 month security deposit. The lessee also paid a P60,000 lease bonus to obtain the lease. The security deposit will be returned at the end of the lease. The advances may be applied against the last three months of the lease. QUESTION: How much is the rent receivable/ unearned rent as of December 31, 2021? show complete solution please
On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 View transaction list 1 Journal entry worksheet 2 (A) Beginning Balance of Lease Liability 3 $ 51,000 33,000 16,981 Note: Enter debits before credits. Date Year 1 December 31 (B) Debit Interest on Lease Liability 6.003% X (A) 3. Prepare the December 31 journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1, (b) Year 2, and (c) Year 3. 1,981 1,019 $ 3,000 + General Journal (C) Debit Lease Liability (D) (B) $ 18,000 16,019 16,981 $ 51,000 Record amortization of right-of use asset at December 31 of…
On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 View transaction list Journal entry worksheet 1 (A) Beginning Balance of Lease Liability $ 51,000 33,000 16,981 2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment. Note: Enter debits before credits. (B) Debit Interest on Lease Liability 6.003% X (A) $0 1,981 1,019 $ 3,000 Record the first lease payment on January 1. Date Year 1 January 01 + General Journal (C) Debit Lease Liability (D) (B) $ 18,000 16,019 16,981 $ 51,000 Debit Credit (D) Credit Cash Lease Payment $ 18,000 18,000 18,000 $ 54,000 (E) Ending…
On January 1, 2020, Warden Industries signed a ten-year noncancelable lease for machinery. Warden is required to make annual payments of $150,000 at the end of each year, and Warden will obtain the title to the machinery at the end of the lease. Therefore, Warden accounted for the lease as a finance lease. The lease payments were determined to have a present value of $1,006,512 at an effective interest rate of 8%. If Warden uses the straight-line method of amortization for fixed assets and the machinery has an estimated useful life of 15 years with no salvage value, which of the following should Warden record for 2020? A. Interest expense of $68,522 and amortization expense of $100,652. B. Interest expense of $80,521 and amortization expense of $67,101. C. Interest expense of $67,101 and amortization expense of $57,102. D. Lease expense of $150,000.
payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield’s incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment.