Exercise 15-1 (Static) Lease classification [LO15-1]Lease term (years)Asset's useful life (years)Asset's fair valuePurchase option that is reasonably certain to beexercised?Annual lease payments.Lessor's implicit rate (known by lessee)Lessee's incremental borrowing rateSituation1.234$44,000MoBeginning of year5%5xLease Classification4Situation$45,000YesEnd of year60%5%346$41,000Required:Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation,determine the appropriate lease classification by the lessee.Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1)NoBeginning of year5%5%$38,000NoEnd of year6%

Lease is an agreement whereby the lessor gives his identifiable asset to the lessee in return for…

Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2 3 4 $44,000 No Beginning of year 5% 5x Lease Classification Situation 4 $45,000 Yes End of year 6X 5% Required: Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation, determine the appropriate lease classification by the lessee. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) 3 4 $41,000 No Beginning of year 5% 5% $38,000 No End of year 6%

Exercise 15-1 (Static) Lease classification [LO15-1] Lease term (years) Asset's useful life (years) Asset's fair value Purchase option that is reasonably certain to be exercised? Annual lease payments. Lessor's implicit rate (known by lessee) Lessee's incremental borrowing rate Situation 1. 2 3 4 $44,000 No Beginning of year 5% 5x Lease Classification Situation 4 $45,000 Yes End of year 6X 5% Required: Each of the four independent situations above describes a lease requiring annual lease payments of $10,000 For each situation, determine the appropriate lease classification by the lessee. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) 3 4 $41,000 No Beginning of year 5% 5% $38,000 No End of year 6%

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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Exercise 15-5 (Static) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.5 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What…
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Exercise 15-33 (Algo) Nonlease payments; lessor and lessee [LO15-2, 15-7] On January 1, 2024, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 11% rate of return for providing long-term financing. The lease agreement specified the following: Ten annual payments of $61,000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $346,464. The lease qualifies as a finance lease/sales-type lease. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $8,000 per year are specified, beginning January 1, 2024. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. A partial amortization schedule, appropriate for both the lessee and lessor, follows: Note: Use…
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a. Choice 1 b. Choice 5 c. Choice 3 d. Choice 4 e. Choice 2