VICTE I VICIOSCurrent Attempt in ProgressSunland Company leases a building to Splish Brothers, Inc. on January 1, 2020. The following facts pertain to the lease agreement.1.2.3.4.5.The lease term is 5 years, with equal annual rental payments of $6,050 at the beginning 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 aspecialized nature.The building has a fair value of $30,000, a book value to Sunland of $23,000, and a useful life of 6 years.At the end of the lease term, Sunland and Splish Brothers expect there to be an unguaranteed residual value of $5,750.Sunland wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Splish Brothers was unawareof the implicit rate used in the lease by Sunland and has an incremental borrowing rate of 9%.How would Sunland (lessor) and Splish Brothers (lessee) classify this lease?Sunland would classify the lease as aSplish Brothers would classify the lease as a sales-type VLease receivableoperating$How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right-of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimalplaces, e.g. 5,275.)Present value of lease pay $lease.SunlandLease Liability/Right-of-Use Asset $lease.Splish Brothers

Lease is a transaction where lessor and lessee will enter into an agreement for the purpose of right…

How would Sunland (lessor) and Splish Brothers (lessee) classify this lease? Sunland would classify the lease as a operating ✓ lease. Splish Brothers would classify the lease as a sales-type How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right- of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Lease receivable Present value of lease pay $ $ tA Lease Liability/Right-of-Use Asset $ Sunland lease. Splish Brothers

How would Sunland (lessor) and Splish Brothers (lessee) classify this lease? Sunland would classify the lease as a operating ✓ lease. Splish Brothers would classify the lease as a sales-type How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right- of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Lease receivable Present value of lease pay $ $ tA Lease Liability/Right-of-Use Asset $ Sunland lease. Splish Brothers

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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Paul Singer indicated that “all leases must now be capitalized on the balance sheet.” Is this statement correct? Explain.
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The objective of IAS 17 Leases is to prescribe the appropriate accounting treatment and required disclosures in relation to leases. Which TWO of the following situations would normally lead to a lease being classified as a finance lease? (1) The lease transfers ownership of the asset to the lessee by the end of the lease term. (ii) The lease term is for approximately half of the economic life of the asset. (iii) The lease assets are of a specialised nature such that only the lessee can use them without major modifications being made. (iv) At the inception of the lease, the present value of the minimum lease payments is 60% of what the leased asset would cost to purchase. Select one: O a. (ii) and (iii) O b. (i) and (iii) c. (i) and (ii) O d. (iii) and (iv)
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Complete this question by entering your answers in the tabs below. Req 1 to 3 and 5 Req 4 Req 6 Req 7 Req 8 Req 9 Req 10 Req 11 1. How should this lease be classified by Yard Art Landscaping (the lessee)? 2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability. 3. How should this lease be classified by Branch Motors (the lessor)? 5. Calculate the amount Branch Motors would record as sales revenue. Note: Round your intermediate and final answers to nearest whole dollar. 1. This lease should be classified by Yard Art as a 2. The amount that Yard Art would record as a right-of-use asset and a lease liability would be 3. This lease should be classified by Branch Motors as a 5. The amount that Branch Motors would record as sales revenue would be Show less▲
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Three independent situations are given. Each describes a finance lease in which annual lease payments are payable at the beginning of each year. Each lease agreement contains an option that permits the lessee to acquire the leased asset at an option price that is sufficiently lower than the expected fair value that the exercise of the option appears reasonably certain. 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) Lease term (years) Lessor's rate of return Fair value of leased asset. Lessor's cost of leased asset. Purchase option: Exercise price Exercisable at end of year: Reasonably certain? Situation 1 Situation 2 Situation 3 1 Annual lease payments 4 10% $92,000 $ 66,000 $ 26,000 4 yes Situation 2 4 11% $ 436,000 $ 436,000 $ 66,000 4 no 3 3 9% $ 201,000 $ 161,000 yes $ 38,000 2 Determine the annual lease payments for each situation: Note: Round your intermediate and final answers to the nearest whole dollar…