please dont give answer in image thnx Crane Corporation ("Crane") manufactures equipment with an estimated economic life of 12 years. On May 30, 2023, Crane leases itto Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows:●.●●●Equipment has a fair value and cost at the inception of the lease: $226,255.Guaranteed residual value: $39,000.Annual lease payment, due at beginning of each year: $31,250.Lease contains no renewal options and the equipment reverts to Crane at the end of the lease.Gadget's incremental interest rate, as well as implicit rate is 10%.Gadget uses straight-line depreciation for similar equipment that it owns.Crane has determined that collectibility of lease payments is reasonably predictable and that no additional costs will beincurred.Assume both companies follow ASPE. Lessor:(c)DateMay 30,2024Prepare journal entries at May 30, 2024 for the lessee and lessor. Assume reversing entries are not used. (List all debit entriesbefore credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answersto O decimal places, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts)Lessee:DateMay 30,2024Account Titles and Explanation(To record lease payment)Account Titles and Explanation(To record interest)(To record collection of lease payment)DebitDebitCreditCredit

A lease is a contract in which the lessor gives the asset to the lessee for agreed period At the end…

Lessor: (c) Date May 30, 2024 Prepare journal entries at May 30, 2024 for the lessee and lessor. Assume reversing entries are not used. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal ploces, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts) Lessee: Date May 30, 2024 Account Titles and Explanation (To record lease payment) Account Titles and Explanation (To record interest) (To record collection of lease payment) Debit Debit Credit Credit

Lessor: (c) Date May 30, 2024 Prepare journal entries at May 30, 2024 for the lessee and lessor. Assume reversing entries are not used. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal ploces, eg. 5,275. If no entry is required, select "No entry" for the account titles and enter O for the amounts) Lessee: Date May 30, 2024 Account Titles and Explanation (To record lease payment) Account Titles and Explanation (To record interest) (To record collection of lease payment) Debit Debit Credit Credit

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 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...

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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.
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).
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.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
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?
Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.
Ayayai Corporation (“Ayayai”) manufactures equipment with an estimated economic life of 12 years. On May 30, 2020, Ayayai leases it to Gadget Corporation (“Gadget”) for a period of 10 years. Assume both companies follow ASPE. Details of the lease are as follows: ● Equipment has a fair value and cost at the inception of the lease: $269,243. ● Guaranteed residual value: $27,000. ● Annual lease payment, due at beginning of each year: $34,000. ● Lease contains no renewal options and the equipment reverts to Ayayai at the end of the lease. ● Gadget’s incremental interest rate, as well as implicit rate is 7%. ● Gadget uses straight-line amortization for similar equipment that it owns. ● Ayayai has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Prepare the journal entries for the lessee and lessor at May 30, 2020, and at December 31, 2020, which is the year end for both the lessee and…
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1. Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: • Lease payments: $2,466,754 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025. • Lease term: five years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: five years. • Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. • Fair value of the computers at January 1, 2021: $20 million. What is the outstanding balance of the lease liability in Lone Star's June 30, 2021, balance sheet? (Round your answer to the nearest whole dollar.).
On January 1, 2019, AA Company leased a plastic molding machine from BB Company. Additional information regarding the lease agreement follows: Lease term 4 years Annual rental payment, in advance 66,500 Residual value at the end of the lease term 15,000 Residual value guaranteed by AA 0 Implicit rate 8% Expected useful life of the machine 6 years AA intends to return the machine to BB at the end of the lease. The annual rental payment includes P1,500 to cover the costs of maintenance and insurance. AA Company, likewise paid P8,000 to its broker for securing the lease. (Use two decimal places for present value factor in answer the following questions) - What is the balance of the lease liability at January 1, 2019? - What is the interest expense to be reported by AA in 2019? - What is the balance of the lease liability at December 31, 2019? - What is the depreciation expense reported in 2019? - What is the carrying value of the leased asset at December 31, 2019? Please provide solutions