Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011.Edison purchased the equipment from International Machines at a cost of $112,080.Related Information:2 years (8 quarterly periods)$15,000 at the beginning of each period2 years$112,080Lease termQuarterly rental paymentsEconomic life of assetFair value of asset8%Implicit interest rate(Also lessee's incremental borrowing rate)Required:Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the inception offthe lease through January 1, 2012. Depreciation is recorded at the end of each financial year (December 31) on astraight-line basis.

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Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 8% Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the inception of

Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 8% Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the inception of

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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On January 1, 20X4, Kangaroo Inc. (KI) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow: Lease payment, including maintenance agreement Maintenance agreement included in lease payment Implicit rate in the lease (not known) Incremental borrowing rate Lease term. Economic life of equipment Guaranteed residual value Expected pay-out on residual value guarantee Option to purchase First annual payment due $85,000 $3,000 4% 5% 6 years 7 years $20,000 $6,000 No Commencement date KI's year-end is December 31. Kl elects to adopt the practical expedient available to it and not to separately report the lease and non-lease components in the contract. What is the amount that it will record for depreciation of this right-of-use asset for its year-ended December 31, 20X4? a $77.988 b $65.355 $76.247 d. $73.582.
Company A leases a motor vehicle from Company B.• The lease became effective 1 January 2014 and the lease term is for 4 years.• The annual lease payments are 10 000 per annum, in arrears.• There is no option of renewal (of the lease agreement).• The implicit interest rate is 10%.• The fair value of the motor vehicle at 1 January 2014 is 31,700. Required:For each of the scenarios below, discuss whether or not the above lease agreementconstitutes a finance lease: Scenario 1: The useful life of the motor vehicle is 8 years. At the end of the lease period,ownership of the motor vehicle transfers from Company B to Company A.  Scenario 2: The useful life of the motor vehicle is 4 years. At the end of the lease period,ownership of the motor vehicle remains with Company B.  Scenario 3: If the lease payments per annum is $5,000 and the useful life of the vehicle is8 years.
Classifying Leases The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of $50,000. Assume in all scenarios that payments are made at the beginning of the period. 1. Lease payments include a fixed payment of $10,000 per year. 2. Lease payments include a fixed payment of $10,000 per year, plus $500 for insurance and $600 for a maintenance contract. 3. Lease payments will be $10,000 in the first year and will increase by 3% (calculated on the previous year's payment) for each of the following 4 years. 4. Lease payments will be $10,000 in the first year and will increase each of the following years by the increase in the CPI from the preceding year. The current CPI is 120 and is expected to increase to 122 at the end of the next year. 5. Lease payments will be $10,000 in the first year and will increase each of the following years by (a) the increase in the CPI from the preceding year, or (b) 3%, whichever is greater. The current CPI is 120…
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $126,890. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,700 at the beginning of each period Economic life of asset 2 years Fair value of asset $126,890 Implicit interest rate 6% (Also lessee’s incremental borrowing rate) Required:Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
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Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: 5 years $88,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $366,951 Implicit interest rate 10% Incrementa1 rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
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On 1 July 2015, Tiger Ltd leased a PET Injection machine from Ibri City Ltd. The machine cost Ibri City Ltd $140,000 to manufacture and had a fair value of $159,109 on 1 July 2015. The lease agreement contained the following provisions: Lease term 4 years Annual rental payment, in advance on 1 July each year $51,500 Residual value at end of the lease term $15,000 Residual guaranteed by lessee nil Interest rate implicit in lease 8% The lease is cancellable only with the permission of the lessor The expected useful life of the machine is 5 years. Tiger Ltd intends to return the machine to the lessor at the end of the lease term. Included in the annual rental payment is an amount of $11500 to cover the costs of maintenance and insurance paid for by the lessor. Required Explain why the lease should be classified as a finance lease by both lessee and lessor based on the guidance provided in Accounting Standard (show all workings including lease…
On January 1, 2021, Small company leased a machine from Huge Company. The following information relates to the lease: Annual rental payable in advance every January 1 - P500,000 Unguaranteed residual value - P50,000 Implicit interest rate in lease - 12% Incremental borrowing rate - 15% Lease term - 6 years Estimated useful life of the machine - 8 years (Round off the PV factor to four decimal places, then do not round off during the computation)What is the balance of Lease Liability at December 31, 2022?
Southwestern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Hi-Tech manufactured the equipment at a cost of $94,500. Other information: 3 years $49,000 on January 1 each year 3 years $136, 382 Lease term Annual payments Life of asset Fair value of asset Implicit interest rate 8% Incremental rate 8% There is no expected residual value. Required: Prepare appropriate journal entries for Hi-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 2 3 > Record the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
King Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $52,538 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $230,000 to produce. Required:1. Determine the price at which the lessor is “selling” the asset (present value of the lease payments).2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?
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