From the following information prepare the sale and leaseback agreement for Steven and CO. On January 1, 2017 Browns and Co. sells an item of machinery to Printers and More for its fair value 600,000. It had a carrying amount of $400000. Browns and Co enters into a contract with Printers and More for the right to use the asset for the next 5 years, annual payments of 1,000,000 are due at the end of each year and the interest implicit in the lease is 10%

From the following information prepare the sale and leaseback agreement for Steven and CO. On January 1, 2017 Browns and Co. sells an item of machinery to Printers and More for its fair value 600,000. It had a carrying amount of $400000. Browns and Co enters into a contract with Printers and More for the right to use the asset for the next 5 years, annual payments of 1,000,000 are due at the end of each year and the interest implicit in the lease is 10%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Christina Co. has a factory equipment with a carrying amount of P700,000 and has a remaining useful life of 7 years. On January 1, 2020, Christina agreed to an exchange transaction with Kat & Inc. to transfer the equipment to the latter. The transfer satisfied the requirements of PFRS 15 to be a sale and Christina immediately leased it back for a lease term equal to the remaining life of the equipment. The sales price amounted to P500,000 while annual rental payable at the end of each year is P100,000 for an implicit rate of 10%. Selling price is equal to fair value. How much loss shall Christina recognize in relation to the sale and leaseback transaction? a. 681,578.63 b. 200,000 c. 194,736.75 d. 5,263.25
On January 1, 2023, Carla Vista Inc. sold a piece of equipment to Sunland Ltd. For $182,000, and immediately leased the equipment back. At the time, the equipment was carried on Carla Vista's books at a cost of $273,000, less accumulated depreciation of $109,000. The lease is a capital lease to Carla Vista, with a lease term of 5 years. The equipment under capital lease will be depreciated in Carla Vista's books over five years using double-declining balance depreciation. Calculate the amortization of the deferred gain on sale to be recorded at the end of 2023, if Carla Vista follows ASPE.
Metro Company, a dealer in machinery and equipment, leased equipment to Sands, Inc., on July 1, 2015. The lease is appropriately accounted for as a sales-type lease by Metro and as a capital lease by Sands. The lease is for a 8-year period (the useful life of the asset) expiring June 30, 2023. The first of 8 equal annual payments of $552,000 was made on July 1, 2015. Metro had purchased the equipment for $3,500,000 on January 1, 2015, and established a list selling price of $4,800,000 on the equipment. Assume that the present value at July 1, 2015, of the rent payments over the lease term discounted at 6% (the appropriate interest rate) was $4,000,000. 43. Assuming that Sands, Inc. uses straight-line depreciation, what is the amount of depreciation and interest expense that Sands should record for the year ended December 31, 2015? a. $400,000 and $206,880 b. $250,000 and $103,440 c. $250,000 and $206,880 d. $240,000 and $103,440 44. What is the amount of profit on the sale and the…
On January 1, 2024, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $779,677 and has an expected economic life of five years. Nevels expects the residual value on December 31, 2027, will be $103,000. Negotiations led to the lessee guaranteeing a $146,000 residual value. Equal payments under the lease are $203,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Nguyen is aware that Nevels used a 8% interest rate when calculating lease payments. 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: Prepare the appropriate entries for both Nguyen and Nevels on January 1, 2024, to record the lease. Prepare all appropriate entries for both Nguyen and Nevels on December 31, 2024, related to the lease.
I MISS HIGH SCHOOL INC. leased a machine from ANYARE SA COLLEGE LTD. on January 01, 2019. The first annual payment was made on January 01, 2020. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. At the end of the lease term, the machine will be returned to ANYARE SA COLLEGE LTD. A residual value in the amount of P5,000 has been guaranteed by I MISS HIGH SCHOOL INC. Interest implicit in the lease is 10% which is known to I MISS HIGH SCHOOL INC.Round present value factors to five decimal places. How much annual depreciation expense should I MISS HIGH SCHOOL INC. record? a. P24,628 b. P16,419 c. P23,378 d. P15,585
Manji
Blossom, Inc. leases a piece of equipment to Wildhorse Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $8,880 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $48,000, a book value of $43,000, and a useful life of 8 years. At the end of the lease term, Blossom expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Blossom wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically
On April 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals of P1,742,174 are payable at the beginning of each lease year starting April 1, 2021. Elle is given the option to buy the machine for P250,000 on April 1, 2025, when the asset’s market price is expected to be P1,250,000. The asset’s useful life is 6 years, at the end of which the asset’s scrap value is expected to be P600,000. Elle uses the straight-line method to depreciate this asset. With an implicit interest rate of 10%, Elle appropriately recorded the machine and the related liability on April 1, 2021 at P6,245,450. Elle Company follows the calendar year as its accounting period. How much is the depreciation expense recognized by Elle for the years ended December 31, 2022 and December 31, 2021? A. P940,908 and P705,681 B. P1,411,363 and P1,058,522 C. P1,040,833 and P780,625 D. P1,561,363 and P1,171,022
Monk Company, a dealer in machinery and equipment, leased equipment with a 10-year life to Leland Inc. on July 1, 2014. The lease is appropriately accounted for as a sale by Monk and as a purchase by Leland. The lease is for an eight-year period, expiring June 30, 2022. The first of eight equal payments of $300,000 is due on June 30, 2015. Leland has an option to purchase the equipment on June 30, 2022, for $100,000 even though the expected residual value at that time is $600,000. Leland’s incremental borrowing rate is 7%, and it uses straight-line depreciation. The equipment is expected to have a salvage value of zero at June 30, 2024. Required: 2. Prepare Leland’s amortization table for the leased equipment.