Lessee Company leased a machine with an estimated useful life of 10 years from Lessor Company. The 5-year noncancelable lease provides that the title to the machine transfers to Lessee Company at the end of the lease term. Lessee Company accounted for the lease as a finance lease and recorded an asset and a liability in its accounting records. The leased asset should be depreciated by Lessee Company over

Lessee Company leased a machine with an estimated useful life of 10 years from Lessor Company. The 5-year noncancelable lease provides that the title to the machine transfers to Lessee Company at the end of the lease term. Lessee Company accounted for the lease as a finance lease and recorded an asset and a liability in its accounting records. The leased asset should be depreciated by Lessee Company over

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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Question 11. C Ltd has a fiscal year end of Sep. 30th. On Oct. 1, 20X8 C Ltd leases an asset to a lessee for a term of five years. The lessee is required to make five lease payments of £27,500, starting with Oct 1, 20X8. The fair value of the asset on Oct 1, 20X8 is £113,500. C Ltd incurs initial direct costs of £421 and the rate of interest implicit in the lease is 12%. At the end of the lease term, ownership of the asset will remain with C Ltd, the asset is expected to have come to the end of its economic life and to have a residual scrap value of £5,100. i) Provide two reasons for why this lease is a finance lease and not an operating lease. ii) Calculate the net investment in the lease at commencement. iii) Prepare lessor's journal entries for the year ending Sep. 30th, 20X9.
6 Company A (lessee) has reached a lease agreement with Company B (assor) to kase a new carpet weaving machine beginning January 1, Year 1. The lease agreement contains the following information • The lease is for five years, requiring annual payments of $10,355.67 at the beginning of the year. • The weaving machine has a fair value at the beginning of the lease of $50,000; an estimated economic life of five years; and a guaranteed residual value of $2,500 (Company A expects that the value will be greater). • Present value of the weaving machine is $47,945.18. • There are no renewal options. At the end of the lease, the weaving machine will be returned to Company B. • Company A depreciates similar equipment that it purchases on a straight-line basis. • Company B sels the annual lease rate al 5% and Company A is aware of the rate. • The lease is a finance lease. COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment Date January 1, Year 1 January 1, Year 1 January…
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The following facts pertain to a non-cancelable lease agreement between Wildhorse Leasing Company and Windsor Company, a lessee. Commencement date June 1, 2025 Annual lease payment beginning with June 1, 2025 $19,998.50 Bargain purchase option price at end of lease term $7,000.00 Lease term Economic life of leased equipment (no salvage value) Lessor's cost Fair value of asset at June 1, 2025 4 years 12 years $56,000 $78,999 Lessor's implicit rate (known to lessee) 6% Lessee's incremental borrowing rate 69 The collectibility of the lease payments by Wildhorse is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) (b) (c) Your answer is partially correct. Prepare a lease amortization schedule for Windsor for the 4-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) WINDSOR COMPANY (Lessee) Date 6/1/25 $ 6/1/25 6/1/26 6/1/27 6/1/28 5/31/29 Annual Lease Payment Plus BPO $ Lease…
6. Explosive Leasing acquires equipment and leases it to customers under long-term sales-type leases. Explosive earns interest under these arrangements at a 6% annual rate. Explosive purchased a device and then leased it for $342,400 under an arrangement that specified annual payments to be received for five years, beginning at the commencement of the lease. The lessee had the option to purchase the device at the end of the lease term for $49,650 when it was expected to have a residual value of $99,300. Calculate the amount of the annual lease payments. (Do not round intermediate calculations. Round your answer to nearest whole dollar amount.)The present value of $1: n = 5, i = 6% is 0.74726.The present value of an ordinary annuity of $1: n = 5, i = 6% is 4.21236.The present value of an annuity due of $1: n = 5, i = 6% is 4.46511.
am. 90.
Recording Operating Lease-Lessor Gomez Inc. leases a vehicle from CareMax Inc. on January 1 for a three-year period. Gomez agrees to make $9,600 annual payments beginning on January 1. Prepare the journal entries during the year for CareMax Inc. assuming that the fair value of the vehicle is $44,800 and it has a useful life of 6 years with no salvage value (depreciated using the straight-line method). CarMax Inc. appropriately classifies the lease as an operating lease. Note: Round your answers to the nearest whole dollar. Account Name Date Jan, 1 Dec. 31 Dec. 31 Check To record receipt of lease payment To record lease revenue + # To record depreciation → = → # Dr. 0 0 0 0 0 0 Cr. 0 0 0 0 0 0
he following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Ivanhoe Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $99,118 Residual value of equipment at end of lease term, guaranteed by the lessee $53,000 Expected residual value of equipment at end of lease term $48,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $554,000 Lessor’s implicit rate 6 % Lessee’s incremental borrowing rate 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. (a) Your answer is partially correct. Try again. Prepare an amortization schedule that would be suitable for the lessee for the lease term.…
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