N corp. entered into a nine year capital lease on a warehouse on December 31,2013 N Corp. entered into a nine-year capital lease on a warehouse onDecember 31, 2013. Lease payments of $34,000, which includesreal estate taxes of $1,500, are due annually, beginning onDecember 31, 2014, and every December 31 thereafter. N Corp.does not know the interest rate implicit in the lease; N'sincremental borrowing rate is 11%. The rounded present value ofan ordinary annuity for nine years at 11% is 6.What amount should N report as capitalized lease liability atDecember 31, 2013?a. $204,000.b. $292,500.C. $195,000.d. $306,000.

Step 1: Define Capital leaseA capital lease is not a typical type of lease where the lease payments…

Answered: N Corp. entered into a nine-year…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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Neal Corp. entered into a nine-year capital lease on a warehouse on December 31, 2016. Lease payments of $52,000, which includes real estate taxes of $2,000, are due annually, beginning on December 31, 2017, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal’s incremental borrowing rate is 9%. The rounded present value of an ordinary annuity for nine years at 9% is 6.0. What amount should Neal report as capitalized lease liability at December 31, 2016? a. $300,000 b. $312,000 c. $450,000 d. $468,000
At the beginning of the current year, Ashe Company entered into a ten-year noncancelable lease requiring year-end payments ofP1,000,000. Ashe’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Ashe, is 10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10% and 5.650 at 12%. On the same date, Ashe Company paid the initial direct cost of P200,000 to negotiate and secure the leasing agreement. Ownership of the property remains to the lessor at the expiration of the lease. The leased property has an estimated economic life of 12 years. 1. What amount should be capitalized as cost of the Right to Use Asset?a. 6,145,000b. 6,345,000c. 5,650,000d. 5,850,000 2. What is the depreciation for the current year?a. 614,500b. 634,500c. 528,750d. 565,000 3. What is the lease liability at the end of the current year?a. 5,328,000b. 5,552,000c. 5,759,500d. 5,979,500
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Lessee Company enters into a lease on January 1, 2024, that is accounted for as a finance lease. The lease calls for quarterly payments of $20,000, beginning on January 1, 2024, and continuing for 5 years. The last payment is due on October 1, 2028. The lease has an implicit annual interest rate of 10%. The present value of an annuity due at 10% per period for 5 periods is 4.170; the present value of an annuity due at 2.50% per period for 20 periods is 15.979. What amount will Lessee report as a lease payable (not including accrued interest) in its balance sheet on December 31, 2024? Multiple Choice $416,987 $261,102 $319,580 $247,630 $416,987
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Company Inc. enters into a 10-year finance lease at the beginning of 2021 for a total of $250,000. The annual lease payment is $25,000 (payable at the end of each year) and the rate implicit in the lease is 5%. No initial direct costs are incurred. How much interest expense should be recognized in 2021?
Ivanhoe Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Ivanhoe. The six-year lease requires payment of $172000 at the beginning of each year, including $25200 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor’s implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Ivanhoe should record the leased asset at 824016 858746 732930 703288
On June 30, 2024, Clark, Incorporated leased warehouse equipment from Woodward, Incorporated. The lease agreement calls for Clark to make semiannual lease payments of $700,000 over a 2-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Clark's incremental borrowing rate is 10%, the same rate Woodward used to calculate lease payment amounts. Woodward manufactured the equipment at a cost of $2,220,000. Lease date Semi-annual payments Lease term Payments per year Equipment's cost Clark's incremental borrowing rate 1. Determine the price at which Woodward is 'selling' the equipment (present value of the lease payments) using Excel's PV function. 2. Prepare the journal entry to record the sale by Woodward Incorporated on June 30, 2024. Date General Journal Debit June 30, 2024 3. Prepare an amortization schedule for the 2-year term of the lease. Date June 30, 2024 December 31, 2024 June 30, 2025 December 31, 2025…
Blossom Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a finance lease for Blossom. The six-year lease requires payment of $180000 at the beginning of each year, including $26000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 11%; the lessor's implicit rate is 9% and is known by the lessee. The present value of an annuity due of 1 for six years at 11% is 4.69590. The present value of an annuity due of 1 for six years at 9% is 4.88965. Blossom should record the leased asset at $880137. O $723169. $753006. O $845262.
On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000 payable at the beginning of each year. ABC does not know the lessor's implicit interest rate. ABC's incremental borrowing rate is 14%. Lessee incurs initial direct costs of P50,000 in negotiating the lease. The underlying asset's remaining useful life is 10 years. Required: 1. Prepare the journal entries for 01/01/2021, 12/31/2021, and 01/01/2022. 2. Compute the carrying amounts of the right of use asset and lease liability on December 31, 2021.
On January 2, 2021, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $174500 residual value of the asset at the end of the lease term. The expected value of the residual value is $62500. Brick’s incremental borrowing rate is 9%, however it knows that Cullumber’s implicit interest rate is 7%. What journal entry would Brick Co. make at January 2, 2021 to record the lease?

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