esponse. Question 5 On January 1, 2020, Sitra Company leased equipment from National Corporation. Lease payments are $300.000, payable annually beginning on January 1, 2020 for 20 years. The lease is non-cancelable. The following information pertains to the agreement: 1. The fair value of the equipment on January 1, 2020 is $2,550,000. 2. The estimated economic life of the equipment was 25 years on January 1, 2020 with guaranteed residual value of $75.000. 3. The lease is non-renewable. At the termination of the lease, the equipment reverts to the lessor. 4. The lessor's implicit rate is 10% which is known to Sitra. Sitra's incremental borrowing rate is 12% (The PV of $1 for 20 periods at 10% is 0.14864 and the PV for an ordinary annuity of $1 for 20 periods at 10% is 8.51356). 5. Sitra uses straight-line method for depreciation. Instructions: A) Compute the present value of minimum lease payments. B) Prepare all necessary journal entries on the lessee's books for the year 2020.

esponse. Question 5 On January 1, 2020, Sitra Company leased equipment from National Corporation. Lease payments are $300.000, payable annually beginning on January 1, 2020 for 20 years. The lease is non-cancelable. The following information pertains to the agreement: 1. The fair value of the equipment on January 1, 2020 is $2,550,000. 2. The estimated economic life of the equipment was 25 years on January 1, 2020 with guaranteed residual value of $75.000. 3. The lease is non-renewable. At the termination of the lease, the equipment reverts to the lessor. 4. The lessor's implicit rate is 10% which is known to Sitra. Sitra's incremental borrowing rate is 12% (The PV of $1 for 20 periods at 10% is 0.14864 and the PV for an ordinary annuity of $1 for 20 periods at 10% is 8.51356). 5. Sitra uses straight-line method for depreciation. Instructions: A) Compute the present value of minimum lease payments. B) Prepare all necessary journal entries on the lessee's books for the year 2020.

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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4...new... b... Bonita Leasing Company agrees to lease equipment to Windsor Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Windsor estimates that the expected residual value at the end of the lease term will be 60,000. Windsor 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. Bonita desires a 10% rate of return on its investments. Windsor’s incremental borrowing ra Calculate the amount of the annual rental payment…
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18) The Thomson Company (lessee) leased equipment from Columbus Industries on January 1, 2021. Columbus(lessor) manufactured the equipment at a cost of $270,000. Other information: Lease term Annual payments Life of asset Lessor's implicit interest rate Lessee's incremental rate 3 years $120,000 beginning Jan. 1, 2021 3 years 8% 9% Required: Round your answers to the nearest whole dollar amounts. 1. Calculate the amount of lease receivable that Columbus would report in this sales-type lease. Round to nearest dollar. Show calculations. If not, no credit. 2. Prepare the appropriate journal entries for Columbus on January 1, 2021. Round to nearest dollar. 3. Prepare the adjusting journal entry for Columbus on December 31, 2021. Round to nearest dollar.