Determining Amounts in Operating Lease-LesseeKulver's Inc. leases equipment from Equip Inc. on January 1 under a 3-year operating lease. Kulver's agrees topay Equip Inc. $15,000 annually with the first payment due on January 1. As an incentive for Kulver's to signthe lease by January 1, Equip Inc. paid Kulver's Inc. $700. Kulver's also incurred legal fees for the review of thelease agreement ($200) and salaries for employees involved in negotiating the lease ($1,300). Assuming anincremental borrowing rate of 7% for Kulver's Inc., determine the value of the lease liability and the right-of-use asset on January 1 for Kulver's.Note: Round your answers to the nearest whole dollar.Lease liability$11,620 XRight-of-use asset $41,620✔Check

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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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The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Commencement date January 1, 2020 Annual lease payment due at the beginning of each year, beginning with January 1, 2020 $113,864 Residual value of equipment at end of lease term, guaranteed by the lessee $50,000 Expected residual value of equipment at end of lease term $45,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2020 $600,000 Lessor's implicit rate 8% Lessee's incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Instructions a. Prepare an amortization schedule that would be suitable for the lessee for the lease term. b. Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease…
Flint Company leased equipment to Land Company for a ﬁve-year period. Flint paid $9,393 for the equipment, which equals its current carrying value (with estimated useful life of ﬁve years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The ﬁrst payment was received on January 1 of Year 1, and Flint’s accounting periods end on December 31. The lease contract contains a purchase option stating that Land Company can purchase the equipment for $800 on January 1 of Year 6, at which time its residual value is estimated to be $1,300. It is reasonably certain that Land Company will exercise the purchase option at the end of the lease term. a. Compute the annual payment calculated by the lessor.
Applying New Lease Accounting Standards for Operating Leases On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. Details of lease contract Leased asset Office space Lease term 5 years Annual lease payment $115,487 Upfront fees $10,000 Cost of debt capital 5% a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. Amount of lease liability b. What amount will be added to the balance sheet as an asset? Amount added as an asset The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!!
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
The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company and Crane Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee January 1, 2025 $125,377 $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2025 $660,000 Lessor's implicit rate 8 % Lessee's incremental borrowing rate 8 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Click here to view factor tables. (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places e.g. 5,275.) Date 1/1/25 $ 1/1/25…
am. 90.
Recording Operating Lease-Lessor Gomez Inc. leases a vehicle from CareMax Inc. on January 1 for a three-year period. Gomez agrees to make $9,600 annual payments beginning on January 1. Prepare the journal entries during the year for CareMax Inc. assuming that the fair value of the vehicle is $44,800 and it has a useful life of 6 years with no salvage value (depreciated using the straight-line method). CarMax Inc. appropriately classifies the lease as an operating lease. Note: Round your answers to the nearest whole dollar. Account Name Date Jan, 1 Dec. 31 Dec. 31 Check To record receipt of lease payment To record lease revenue + # To record depreciation → = → # Dr. 0 0 0 0 0 0 Cr. 0 0 0 0 0 0
Accounting for Leases (FSET) On January 3, Hanna Corporation signed a lease on a machine for its manufacturing operation and the lease commences on the same date. The lease requires Hanna to make six annual lease payments of $18,000 with the first payment due December 31. Hanna could have financed the machine by borrowing the purchase price at an interest rate of 7%. a. Using the financial statement effects template, report the entries that Hanna Corporation would make on January 3 and December 31 to record this lease assuming 1. the lease is reported as an operating lease. II. the lease is reported as a finance lease. Note: Use negative signs with your answers, when appropriate. Note: Select "NA" as your answer if a part of the accounting equation is not affected. to the nearest • Note: Round answers to the nearest whole dollar. 1. Operating Lease: II. Finance Lease: Operating lease commences Lease payment. Transaction Record lease expense and changes to asset and liability.…
7
he following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Ivanhoe Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $99,118 Residual value of equipment at end of lease term, guaranteed by the lessee $53,000 Expected residual value of equipment at end of lease term $48,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $554,000 Lessor’s implicit rate 6 % Lessee’s incremental borrowing rate 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. (a) Your answer is partially correct. Try again. Prepare an amortization schedule that would be suitable for the lessee for the lease term.…
Mighty Inc. leases equipment from Equity Leasing with a five-year non-cancelable lease on January 1, 2021 under the following terms: Five payments of $26,379.74 (a 9% implicit rate which is known to Mighty) due at the end of each year. The payments were calculated based on the fair value (which is also Equity’s book value) of the equipment. The lease is nonrenewable and the equipment revers to Equity at the end of the lease term. The equipment has a six-year economic life. What type of lease is this to Equity Leasing? Make the journal entry that Equity would make to record this lease on January 1, 2021. Make the journal entry that Mighty would make to record the second payment on December 31, 2022.

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