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The Harris Company is the lessee on a four-year lease with the following payments at the end of each year:
Year 1 : $18,000
Year 2: $23,000
Year 3: $28,000
Year 4: $33,000
An appropriate discount rate is 7%, yielding a
If the lease is an operating lease, what will be the initial value of the right-of-use asset?
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- Minnetonka Company leases an asset. Information regarding the lease (Minnetonka is the lessee): • Fair value of the asset: $400,000. • Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. • Annual lease payments are $60,000 Implicit interest rate: 11%. • Minnetonka can purchase the asset at the end of the lease period for $50,000. How should the lessee classify this lease? A) Operating. B) Finance. C) Short term. D) Long term. O B O O OOA six-year operating lease requires annual rent payments of $15,000 for years 1, 2, and 3, and annual rent payments of $10,000 for years 4, 5, and 6. The agreement also requires the lessor to pay a $2,800 annual insurance premium for the leased property. Which of the following amounts should be recognized as the rental revenue in year 1 by the lessor? O $10,000 O $16,800 $13,500 O $15,000A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 over a six-year lease term (also the asset’s useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Determine the present value of the lease upon the lease's inception. Create a partial amortization table through the second payment on January 1, Year 2. If the lessee’s fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?
- 18. Which of the following lease conditions would result in a finance lease to the lessee? a.The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $16,000. b.The lease term is 70% of the property's economic life. c.The lessee will return the property to the lessor at the end of the lease term. d.The lessee can purchase the property for $1 at the end of the lease term.Ayayai Incorporated leases a piece of equipment to Kingbird Corporation on January 1, 2020. The lease agreement called for annual rental payments of $6,823 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 5 years, a fair value of $26,300, a book value of $21,300, and both parties expect a residual value of $8,300 at the end of the lease term, though this amount is not guaranteed. Ayayai set the lease payments with the intent of earning a 6% return, and Kingbird is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: $15,500 $20,500 $25,500 $30,500 An appropriate discount rate is 7 percentage, yielding a present value of $76,475. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will be the initial value of the lease liability? Initial value of the lease liability
- A lease agreement that qualifies as a finance lease calls for annual lease payments of $25,000 over a six-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Complete the amortization schedule for the first two payments. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? 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)A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease ferm (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its Income statement for the first year ended December 31 (ignore taxes)? 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 51) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the present value of the lease upon the lease's inception. Note: Round your answers to nearest whole number and round percentage answer to 1…The lease requires equal rental payments of $30,580 at the beginning of each year of the term. The PV of the lease payments is $177,030. The company pays all executory costs directly to third parties. The appropriate interest rate is 10.57%. Assume IFRS 16 applies. Both the lessor and lessee have December 31 year ends. How much total revenue will be recorded by the lessor in its books in Year 1 in relation to this lease assuming (1) the fair value of the equipment equals the PV of the lease payments and (2) the lessor is an equipment vendor? If applicable, include interest, sales, and rent in the revenue calculation. $187,697 $192,510 $197,323 $202,135 $206,948
- On January 1, 2025, Haystack, Inc. leased equipment to Silver Point Company. The equipment had a cost and fair value of $780,000. The 5-year lease calls for equal annual payments at the beginning of each year. The equipment has an expected useful life of 5 years. The rate implicit in the lease is 8% but the lessee's incremental borrowing rate is 10%. What are the equal annual lease payments the lessor will charge? (Round to whole dollars) L The present value of an ordinary annuity at: 10% for 5 periods is 3.79079 8% for 5 periods is 3.99271 The present value of an annuity due at: 10% for 5 periods is 4.16986 8% for 5 periods is 4.31213 The present value of a single sum of $1 at: 10% for 5 periods is .62092 8% for 5 periods is .68058 O A. $181,972 OB. $180,885 OC. $175,820 OD. $195,356 O E. $162,795A lease agreement that qualifies as a finance lease calls for annual lease payments of $36,000 over a four-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: Determine the present value of the lease upon the lease's inception. Create a partial amortization table through the second payment on January 1, Year 2. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)?Pepper, Inc. agrees to lease equipment from the Blue Corporation for 10 years at $25,000 at the end of each year. The equipment has a fair value of $175,000 and an estimated useful life of 10 years. The lease includes a guaranteed residual value of $10,000. In addition to the lease payments, Pepper will pay $5,000 per year for a maintenance agreement. Pepper can finance this lease with its bank at a 12% rate. The lessor’s implicit lease rate, known to the lessee, is 10%. The lessor and the lessee use ASC 842 guidelines for lease accounting. Present value interest factors are: 10% 12% PV factor of $1 for 10 periods 0.38554 0.32197 PV factor for ordinary annuity for 10 periods 6.14457 5.65022 The Pepper lease is a(n): Multiple Choice A. operating lease because ownership does not automatically transfer to the lessee at the end of the lease term. B. short-term lease because the lease value is less than the fair value of the asset. C. operating lease because the…
