Date Current Attempt in Progress On January 1, 2022, Carla Vista Inc., a construction company, leased an excavator from Sandhill Inc. The lease terms are as follows: ● ● ● Annual lease payments of $28,300 at the beginning of each year for five years At the end of the lease term the asset reverts back to the lessor and the residual value guarantee is $11,400 The incremental borrowing rate is 8% and the implicit rate in the lease is 7% (known by the lessee) Carla Vista Inc. has a December 31 year end Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Account Titles and Explanation (To record depreciation) (To record interest) Debit Credit

Date Current Attempt in Progress On January 1, 2022, Carla Vista Inc., a construction company, leased an excavator from Sandhill Inc. The lease terms are as follows: ● ● ● Annual lease payments of $28,300 at the beginning of each year for five years At the end of the lease term the asset reverts back to the lessor and the residual value guarantee is $11,400 The incremental borrowing rate is 8% and the implicit rate in the lease is 7% (known by the lessee) Carla Vista Inc. has a December 31 year end Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Account Titles and Explanation (To record depreciation) (To record interest) Debit Credit

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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On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. Lease payments are $57,000 per year and are made at the beginning of the year. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 57,000 44,000 1/1/2023 57,000 38,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)
Manufacturers Southern leasedhigh tech electronics equipment from international machines on January 1, 2024. international machines manufactured the equipment at a cost of $89,000. Manufacturers Southern's fiscal year ends December 31. Manufacturers Southern's fiscal year ends December 31. Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,000 at the beginning of each period Economic life of asset 2 years Fair value of asset $117,590 Implicit interest rate 10% Required: 1. Show how International Machines determined the $16,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2024, and the second lease payment on April 1, 2024
Wildhorse Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $199,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. ● The lease requires payments of $45,359 at the beginning of each year starting January 1, 2019. ● At the end of the lease term, the equipment is to be returned to the lessor. ● Lantus’ implied interest rate is 7%, while Wildhorse’s borrowing rate is 8%. Wildhorse uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE. (a)Determine the present value of the minimum lease payments Ans 199,000 B.) Prepare Wildhorse’s lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.) Date Payment Interest Principal Balance…
On January 1, 20X4, Kangaroo Inc. (KI) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow: Lease payment, including maintenance agreement Maintenance agreement included in lease payment Implicit rate in the lease (not known) Incremental borrowing rate Lease term. Economic life of equipment Guaranteed residual value Expected pay-out on residual value guarantee Option to purchase First annual payment due $85,000 $3,000 4% 5% 6 years 7 years $20,000 $6,000 No Commencement date KI's year-end is December 31. Kl elects to adopt the practical expedient available to it and not to separately report the lease and non-lease components in the contract. What is the amount that it will record for depreciation of this right-of-use asset for its year-ended December 31, 20X4? a $77.988 b $65.355 $76.247 d. $73.582.
On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate is 8%.Required:1. Calculate the present value of the lease payments. Round to the nearest whole dollar. (Hint: Use a financial calculator or Excel)2. Record the lease on June 1, 2021.
Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…
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.
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
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…
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: 5 years $88,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $366,951 Implicit interest rate 10% Incrementa1 rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2017. Annual lease payments of $1,616, based on an interest rate of 6%, are to be made every December 31, beginning with December 31, 2017. PV of Annuity of $1 Required: Refer to the table above for present value factors. 1. Assume that the lease is treated as an operating lease. a. Will the value of the forklift appear on Koffman's balance sheet?No b. What account will indicate that lease payments have been made?Lease expense From the viewpoint of the lessee, there are two types of lease agreements: operating and capital. In an operating lease, the lessee acquires the right to use an asset for a limited period of time. The lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability. 2. Assume that the lease is treated as a capital lease or finance lease. a. Identify and analyze the effect when…
O On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance $ 314,048 2024 $ 24,000 $ 24,000 $ 290,048 2025 $ 24,000 $ 14,502 $ 9,498 $ 280,550 2026 $ 24,000 $ 14,028 $ 9,972 $ 270,578 2027 $ 24,000 $ 13,529 $ 10,471 $ 260,107 2028 $ 24,000 $ 13,005 $ 10,995 $ 249,112 2029 $ 24,000 $ 12,456 $ 11,544 $ 237,568 2030 $ 24,000 $ 11,878 $ 12,122 $ 225,446 — — — — — — — — — — — — — — — 2041 $ 24,000 $ 11,272 $ 12,728 $ 44,627 2042 $ 24,000 $ 2,231 $ 21,769 $ 22,858 2043 $ 24,000 $ 1,143 $ 22,857 $ 0 Required: What is Majestic’s lease liability at the beginning of the lease (after the first payment)? What…