Please answer E21-14. E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walshlease in E21.13. In this instance, however, Walsh is unaware of the implicit rateused in the lease by Phelps and has an incremental borrowing rate of 9%.InstructionsHow would your answer to E21.13(a) change? E21.13 (LO 2, 3) (Lessee-Lessor Entries, Sales-Type Lease; GuaranteedResidual Value) Phelps plc leases a building to Walsh Ltd. on January 1, 2022.The following facts pertain to the lease agreement.1. The lease term is 5 years, with equal annual rental payments of £4,703 at thebeginning of each year.2. Ownership does not transfer at the end of the lease term, there is no bargainpurchase option, and the asset is not of a specialized nature.3. The building has a fair value of £23,000, a book value to Phelps of £16,000,and a useful life of 6 years.4. At the end of the lease term, Phelps and Walsh expect there to be anunguaranteed residual value of £4,000.5. Phelps wants to earn a return of 8% on the lease, and collectibility of thepayments is probable. This rate is known by Walsh.Instructionsa. How would Phelps (lessor) classify this lease? How would Phelps initiallymeasure the lease receivable, and how would Walsh initially measure thelease liability and right-of-use asset?

Capital Lease - It is an agreement where lessor has agreed to transfer ownership of the assets to…

E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walsh lease in E21.13. In this instance, however, Walsh is unaware of the implicit rate used in the lease by Phelps and has an incremental borrowing rate of 9%. Instructions How would your answer to E21.13(a) change?

E21.14 (LO 2) (Lessee Entries) Use the information for the Phelps/Walsh lease in E21.13. In this instance, however, Walsh is unaware of the implicit rate used in the lease by Phelps and has an incremental borrowing rate of 9%. Instructions How would your answer to E21.13(a) change?

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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