Produc13 Payne Oil Company began operations during 2019. The following information isas of 12/31/19 and early 2020. Expense lifting costs as lease operating expense.Transactions, 2019Lease ALease BLease C*a. Acquisition costs of unde-veloped leases (1/8 RI)$ 60,000$ 30,000$ 40,00090,000*b. G&G costs60,00050,000*c. Drilling costsd. Drilling results:200,000230,000Drillingcompleted; dry250,000Drilling notcompletedDrillingcompleted700,000 bbl300,000 bbl(as of 12/31)Proved reservesProved developed reservese. Productionf. Lifting costsDecember 3110,000 bbl$ 250,000Recorded DD&A Impaired lease 40%g.Transactions, 2020h. Assume on January 2 of the second year (2020) that disaster struck both LeaseA and Lease B. Give the entries to record abandonment of Lease A and LeaseB. Assume equipment costing $15,000 was salvaged from Lease A. Assumethis is not a post-balance sheet event that would give rise to changes in thebalance sheets or income statements of previous years.*May combine entries for different leases.REQUIRED: From the data, (1) prepare entries, and (2) prepare an incomestatement for Payne Oil Company for 2019, assuming revenue to the companyfrom oil sales is $1,200,000.

Lease: Lease refers to a contract between the lessor and the lessee where the lessor is the owner of…

*May combine entries for different leases. REQUIRED: From the data, (1) prepare entries, and (2) prepare an income statement for Payne Oil Company for 2019, assuming revenue to the company from oil sales is $1,200,000.

*May combine entries for different leases. REQUIRED: From the data, (1) prepare entries, and (2) prepare an income statement for Payne Oil Company for 2019, assuming revenue to the company from oil sales is $1,200,000.

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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1. On December 31,2020 the account for Shane Oil Company's individually insignificant unproved properties had a balance of $600,000. The impairment allowance account had a balance of $100,000. Required Give the entries for each of the following transactions occurring in 2020 and 2021 (all transactions concern individually Insignificant unproved leases) a.Assuming Shane has a policy of maintaining a 60% allowance, i.e. 60% of gross unproved properties, give the entry to record impairment on December 31, 2020 b.During 2021 Shane surrendered leases that cost $200,000. c.During 2021,leases that cost $40,000 were proved d.Give the entry to record impairment on December 31, 2021.
Chance Enterprises leased equipment from Third Bank Leasing on January 1, 2018. Third Bank purchased the equipment at a cost of $1,400,000. Chance elected the short-term lease option. Appropriate adjusting entries are made annually. Related Information: 1 year (4 quarterly periods) $56,000 at Jan. 1, 2018, and at Mar. 31, June 30, and Sept. 30. 5 years Lease term Quarterly lease paymenta Economic life of asset Interest rate charged by the lessor Required: Prepare appropriate entries for Chance from the beginning of the lease through December 31, 2018. (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 amount.)
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c) The information below relates to a leasing arrangement between Frankfield Leasing Company and Boswell Manufacturing Company, a lessee. Inception date Lease term (non cancellable) January 1, 2020 5 years Annual lease payment due at the beginning of each $28,500 year beginning January 1, 2020 Fair value of asset at January 1, 2020 Economic life of leased equipment $130,000 6 years Residual value of equipment at end of lease $25,270 term, unguaranteed by the lessee Lessor's implicit rate (not known by the lessee) 6% Lessee's incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. There is an expected residual value of $25,270 which is unguaranteed by the lessee. The lessee uses the straight-line depreciation method for all equipment. (Round all figures to the nearest $1.)
What amount of interest revenue should be recorded in 2021? *a. 490,000b. 480,000c. 438,000d. 391,800
1. 2. The lessee makes a lease payment of $75,200 to the lessor for equipment in an operating lease transaction. Wildhorse Company leases equipment from Noble Construction Inc. The present value of the lease payments is $658,000. The lease qualifies as a capital lease.. Prepare the journal entries that the lessee should make to record the above transactions assuming the entities report under ASPE. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Account Titles 1. Debit Credit
A saltwater disposal system is added to Lease A's gathering system at a cost of $225,000. Assume the following acquisition costs and monthly operating expense fro the motn of May 2018 is $30,000. Case A: The disposal system serves several wells on two different leases. There are 7 wells on lease A and 10 wells on Lease B. Case B: the disposal system serves only the wells on Lease A. Required: Record the acquisition cost and the monthly expenses.
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.
Assume that on December 31, 2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $164,588 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,114,500. The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an expected residual value of $34,900. Teal Mountain depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Teal Mountain's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Teal Mountain.
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