he Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. What isthe present value of the operating lease? Select one: a. None of the given options is correct b. R125 000 c. R64 571 d. R48 188

he Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. What isthe present value of the operating lease? Select one: a. None of the given options is correct b. R125 000 c. R64 571 d. R48 188

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 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance. Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings was R125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. The land would be classified as Select one: O a. a finance lease O b. an accounting lease O c. a financial lease O d. an operating lease
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance. Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings was R125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. How much of the R26 720 annual payment would be allocated to the operating lease? Select one: O a. R14 322 O b. R9 339 O c. R13 360 O d. R13 369
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. The landwould be classified as_______.Select one:a.an accounting leaseb.a finance leasec.a financial leased.an operating lease
Smart Ltd negotiated a lease for equipment on the following terms: the lease had a 3 year term; the purchase price of the new equipment was R41 250; there were to be 3 annual payments of R15 000 payable in advance; and Smart Ltd was able to borrow at 10% per annum. The finance charge in the first year using the sum of the digits method would be Select one: O a. R2 500 O b. R4 125 O c. R15 000 O d. R1 500
Smart Ltd negotiated a lease on the following terms: the lease had a 3 year term; the purchase price of the new equipment was R41 250; there were 3 annual payments of R15 000 payable in advance; and Smart Ltd was able to borrow at 10% per annum. The balance sheet liability figure at the end of the second year would be Select one: O a. R13 750 O b. R15 000 O c. R12 250 O d. R15 000
JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd $16m and has an expected useful life of 12 years. Its selling price is $22.4m. The present value of the lease payments is $20.4m. The first payment was made at the commencement of the lease. Required: How should JK Ltd classify this list and why?
Chad Ltd negotiated a lease on the following terms: the term of the lease was 5 years; the estimated useful life of theleased equipment was 10 years; the purchase price was R60 000; and the annual lease payment was R5 000. This leaseshould be classified as_____.Select one:a.a financial leaseb.An operating leasec.neither operating nor finance leased.A finance lease
Q25 Chad Ltd negotiated a lease on the following terms: the term of the lease was 5 years; the estimated useful life of the leased equipment was 10 years; the purchase price was R60 000; and the annual lease payment was R5 000. This lease should be classified as_____. Select one: a. A finance lease b. neither operating nor finance lease c. An operating lease d. a financial lease
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 18,500 Year 2: $ 23,500 Year 3: $ 28,500 Year 4: $ 33,500 An appropriate discount rate is 7 percentage, yielding a present value of $86,637. b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1? (Round your answer to…
Q1. Jack plc entered into a non-cancellable lease agreement for an item of machine on the followingterms:Fair value of the machine: €10,000Lease term: 5 yearsFive annual rentals payable in advance of €2,100Lessor’s unguaranteed estimated residual value at the end of five years: €1,000Implicit interest rate in the lease: 6.62% per annumCommencement date: 1 Jan 2018Lessee’s financial year-end: 31 DecemberNote: the present value of an ordinary annuity of €1 per year for 4 years at 6.62%interest is€3.42.REQUIRED:(a) Determine whether this lease represents a finance lease or an operating lease in accordancewith IFRS 16 (show all your workings);(b) Prepare the income statement and balance sheet extracts for the years ended 31December 2018 to 2022.
Which of the following lease arrangements would most likely be accounted for as a finance lease by the lessor if it is under US GAAP instead of IFRS? a. The lease agreement runs for 15 years and the economic life of leased property is 20 years. However, the title is not transferred to the lessee at the end of the lease term. b. The present value of future payments is P73,600 when the fair value of the property is P80,000 at the end of the first lease year. c. The lessee shoulders the gain or loss from fluctuation in the fair value of the underlying asset. d. The lessee may renew the two-year lease for two additional years; originally the lease payments were P10,000 monthly. Renewed lease term calls for P11,000 monthly rental payment.
18. Which of the following lease arrangements would most likely be accounted for as a finance lease by the lessor if it is under US GAAP instead of IFRS? * a. The lease agreement runs for 15 years and the economic life of leased property is 20 years. However, the title is not transferred to the lessee at the end of the lease term. b. The present value of future payments is P73,600 when the fair value of the property is P80,000 at the end of the first lease year. c. The lessee shoulders the gain or O loss from fluctuation in the fair value of the underlying asset. d. The lessee may renew the two- year lease for two additional years; originally the lease payments were P10,000 monthly. Renewed lease term calls for P11,000 monthly rental payment.