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Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments o $12,000 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $35,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $4,000. The equipment reverts back to the lessor at the termination of the lease and is expected have use to the lessor. The lessee is aware that the lessor used an implicit rate of 6%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 1. Indicate the type of lease Jay has entered into and why (include a list of the Capital Lease Criteria) (Present Value & Future Value Tables are provided on pages 3 and 4) 2. Prepare the journal entries on Jay's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021

Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments o $12,000 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $35,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $4,000. The equipment reverts back to the lessor at the termination of the lease and is expected have use to the lessor. The lessee is aware that the lessor used an implicit rate of 6%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 1. Indicate the type of lease Jay has entered into and why (include a list of the Capital Lease Criteria) (Present Value & Future Value Tables are provided on pages 3 and 4) 2. Prepare the journal entries on Jay's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021

FINANCIAL ACCOUNTING
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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8:19 ull LTE e bbhosted.cuny.edu – Private 3 of 4 Present Value of an Ordinary Annuity of 1 PVF-OAn,i=1-14-)ni (n) Periods 2% 2¼% 3% 4% 5% 6% 1 .98039 .97561 .97087 .96154 95238 94340 2 1.94156 1.92742 1.91347 1.88609 1.85941 1.83339 3 2.88388 2.85602 2.82861 2.77509 2.72325 2.67301 4 3.80773 3.76197 3.71710 3.62990 3.54595 3.46511 5 4.71346 4.64583 4.57971 4.45182 4.32948 4.21236 6 5.60143 5.50813 5.41719 5.24214 5.07569 4.91732 6.47199 6.34939 6.23028 6.00205 5.78637 5.58238 8 7.32548 7.17014 7.01969 6.73274 6.46321 6.20979 9 8.16224 7.97087 7.78611 7.43533 7.10782 6.80169 10 8.98259 8.75206 8.53020 8.11090 7.72173 7.36009 Present Value of an Annuity Due of 1 PVF-ADn,i=1+1-4-»-ti (n) Periods 2% 2¼% 3% 4% 5% 6% 1 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.98039 1.97561 1.97087 1.96154 1.95238 1.94340 3 2.94156 2.92742 2.91347 2.88609 2.85941 2.83339 4 3.88388 3.85602 3.82861 3.77509 3.72325 3.67301 4.80773 4.76197 4.71710 4.62990 4.54595 4.46511 6 5.71346 5.64583 5.57971 5.45182 5.32948 5.21236 6.60143 6.50813 6.41719 6.24214 6.07569 5.91732 8 7.47199 7.34939 7.23028 7.00205 6.78637 6.58238 9 8.32548 8.17014 8.01969 7.73274 7.46321 7.20979 10 9.16224 8.97087 8.78611 8.43533 8.10782 7.80169 Present Value of 1 (Present Value of a Single Sum) PVFN,i=1(1+i)«=(1+i)-n (n) Periods 2% 2¼% 3% 4% 5% 6% 1 .98039 .97561 .97087 .96154 .95238 .94340 2 .96117.95181 .94260 .92456 .90703 .89000 3 .94232 .92860 .91514 .88900 .86384 .83962 .92385 .90595 .88849 .85480 .82270 .79209 .90573 .88385 ,86261 ,82193 ,78353 74726 88797 ,86230 83748.79031.746Z2 .70496
Transcribed Image Text:8:19 ull LTE e bbhosted.cuny.edu – Private 3 of 4 Present Value of an Ordinary Annuity of 1 PVF-OAn,i=1-14-)ni (n) Periods 2% 2¼% 3% 4% 5% 6% 1 .98039 .97561 .97087 .96154 95238 94340 2 1.94156 1.92742 1.91347 1.88609 1.85941 1.83339 3 2.88388 2.85602 2.82861 2.77509 2.72325 2.67301 4 3.80773 3.76197 3.71710 3.62990 3.54595 3.46511 5 4.71346 4.64583 4.57971 4.45182 4.32948 4.21236 6 5.60143 5.50813 5.41719 5.24214 5.07569 4.91732 6.47199 6.34939 6.23028 6.00205 5.78637 5.58238 8 7.32548 7.17014 7.01969 6.73274 6.46321 6.20979 9 8.16224 7.97087 7.78611 7.43533 7.10782 6.80169 10 8.98259 8.75206 8.53020 8.11090 7.72173 7.36009 Present Value of an Annuity Due of 1 PVF-ADn,i=1+1-4-»-ti (n) Periods 2% 2¼% 3% 4% 5% 6% 1 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.98039 1.97561 1.97087 1.96154 1.95238 1.94340 3 2.94156 2.92742 2.91347 2.88609 2.85941 2.83339 4 3.88388 3.85602 3.82861 3.77509 3.72325 3.67301 4.80773 4.76197 4.71710 4.62990 4.54595 4.46511 6 5.71346 5.64583 5.57971 5.45182 5.32948 5.21236 6.60143 6.50813 6.41719 6.24214 6.07569 5.91732 8 7.47199 7.34939 7.23028 7.00205 6.78637 6.58238 9 8.32548 8.17014 8.01969 7.73274 7.46321 7.20979 10 9.16224 8.97087 8.78611 8.43533 8.10782 7.80169 Present Value of 1 (Present Value of a Single Sum) PVFN,i=1(1+i)«=(1+i)-n (n) Periods 2% 2¼% 3% 4% 5% 6% 1 .98039 .97561 .97087 .96154 .95238 .94340 2 .96117.95181 .94260 .92456 .90703 .89000 3 .94232 .92860 .91514 .88900 .86384 .83962 .92385 .90595 .88849 .85480 .82270 .79209 .90573 .88385 ,86261 ,82193 ,78353 74726 88797 ,86230 83748.79031.746Z2 .70496
Problem #1 Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments of $12,000 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $35,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $4,000. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. The lessee is aware that the lessor used an implicit rate of 6%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 1. Indicate the type of lease Jay has entered into and why (include a list of the Capital Lease Criteria) (Present Value & Future Value Tables are provided on pages 3 and 4) 2. Prepare the journal entries on Jay's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021
Transcribed Image Text:Problem #1 Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is three years, with no renewal option. Payments of $12,000 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $35,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $4,000. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. The lessee is aware that the lessor used an implicit rate of 6%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 1. Indicate the type of lease Jay has entered into and why (include a list of the Capital Lease Criteria) (Present Value & Future Value Tables are provided on pages 3 and 4) 2. Prepare the journal entries on Jay's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021
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