eal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years. 2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31 and that neither company uses reversing entries.) Click here to view factor tables. (a) Correct answer icon Your answer is correct. Discuss the nature of this lease for both the lessee and the lessor. This is a select a type of lease for Flint. This is a select a type of lease for Teal. eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) Incorrect answer icon Your answer is incorrect. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $enter the annual rental payment in dollars rounded to 0 decimal places eTextbook and Media List of Accounts Save for Later Attempts: 1 of 3 used Submit Answer (c) The parts of this question must be completed in order. This part will be available when you complete the part above. (d) The parts of this question must be completed in order. This part will be available when you complete the part above. (e) The parts of this question must be completed in order. This part will be available when you complete the part above. (f) The parts of this question must be completed in order. This part will be available when you complete the part above.

eal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years. 2. The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. (Assume the accounting period ends on December 31 and that neither company uses reversing entries.) Click here to view factor tables. (a) Correct answer icon Your answer is correct. Discuss the nature of this lease for both the lessee and the lessor. This is a select a type of lease for Flint. This is a select a type of lease for Teal. eTextbook and Media List of Accounts Attempts: 1 of 3 used (b) Incorrect answer icon Your answer is incorrect. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment $enter the annual rental payment in dollars rounded to 0 decimal places eTextbook and Media List of Accounts Save for Later Attempts: 1 of 3 used Submit Answer (c) The parts of this question must be completed in order. This part will be available when you complete the part above. (d) The parts of this question must be completed in order. This part will be available when you complete the part above. (e) The parts of this question must be completed in order. This part will be available when you complete the part above. (f) The parts of this question must be completed in order. This part will be available when you complete the part above.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 1P: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases...

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(a)

Correct answer icon

Your answer is correct.

Discuss the nature of this lease for both the lessee and the lessor.

This is a select a type of lease for Flint.

This is a select a type of lease for Teal.

eTextbook and Media

List of Accounts

Attempts: 1 of 3 used

(b)

Incorrect answer icon

Your answer is incorrect.

Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Annual rental payment

$enter the annual rental payment in dollars rounded to 0 decimal places

eTextbook and Media

List of Accounts

Save for Later

Attempts: 1 of 3 used

Submit Answer

(c)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(d)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(e)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(f)

The parts of this question must be completed in order. This part will be available when you complete the part above.

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1.		The term of the lease is 6 years with no renewal option, and the machinery has an estimated economic life of 8 years.
2.		The cost of the machinery is $314,000, and the fair value of the asset on January 1, 2020, is $406,000.
3.		At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $36,300. Flint estimates that the expected residual value at the end of the lease term will be $36,300. Flint amortizes all of its leased equipment on a straight-line basis.
4.		The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		The collectibility of the lease payments is probable.
6.		Teal desires a 6% rate of return on its investments. Flint’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.