Huskies Together Company leased equipment from Caterpillar, beginning on December 31, 2020. The lease term is 4 years and requires equal rental payments of $41,933 at the beginning of each year of the lease, starting on the commencement date (December 31, 2020). The equipment has a fair value at the commencement date of the lease of $150,001, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Huskies Together's 2020 and 2021 journal entries, assuming Huskies Together depreciates similar equipment it owns on a straight-line basis. k for potiol orodite

Huskies Together Company leased equipment from Caterpillar, beginning on December 31, 2020. The lease term is 4 years and requires equal rental payments of $41,933 at the beginning of each year of the lease, starting on the commencement date (December 31, 2020). The equipment has a fair value at the commencement date of the lease of $150,001, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Huskies Together's 2020 and 2021 journal entries, assuming Huskies Together depreciates similar equipment it owns on a straight-line basis. k for potiol orodite

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.
Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Waterworld Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $41,933 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $150,001, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Waterworld's 2019 and 2020 journal entries, assuming Waterworld depreciates similar equipment it owns on a straight-line basis
Marin Company leased equipment from Costner Company, beginning on December 31, 2024. The lease term is 4 years and requires equal rental payments of $108,765 at the beginning of each year of the lease, starting on the commencement date (December 31, 2024). The equipment has a fair value at the commencement date of the lease of $370,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 12%. Click here to view factor tables. Prepare Marin's 2024 and 2025 journal entries, assuming Marin depreciates similar equipment it owns on a straight-line basis. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. 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.…
Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $113,273 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $400,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 9%.Click here to view factor tables.Prepare Sage Hill’s 2019 and 2020 journal entries, assuming Sage Hill depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit enter an…
Kingbird Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 5 years and requires equal rental payments of $78,002 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $320,000, an estimated useful life of 5 years, and no estimated residual value. The appropriate interest rate is 11%.Click here to view factor tables.Prepare Kingbird’s 2019 and 2020 journal entries, assuming Kingbird depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)
Kingbird Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 5 years and requires equal rental payments of $78,002 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $320,000, an estimated useful life of 5 years, and no estimated residual value. The appropriate interest rate is 11%.Click here to view factor tables.Prepare Kingbird’s 2019 and 2020 journal entries, assuming Kingbird depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)…
Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 5 years and requires equal rental payments of $68,401 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $290,000, an estimated useful life of 5 years, and no estimated residual value. The appropriate interest rate is 9%.Click here to view factor tables.Prepare Sage Hill’s 2019 and 2020 journal entries, assuming Sage Hill depreciates similar equipment it owns on a straight-line basis. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275.)