On 31 December 20X1, Lessee Ltd. entered into a lease agreement by which Lessee leased a jutling machine for six years. Annual leasepayments are $20,000, payable at the beginning of each lease year (31 December). At the end of the lease, possession of the machinewill revert to the lessor. The normal economic life for this type of machine is 8 to 10 years.At the time of the lease agreement, jutling machines could be purchased for approximately $90,000 cash. Equivalent financing for themachine could have been obtained from Lessee's bank at 14%.Lessee uses straight-line depreciation for its jutling machines.Required:1. Prepare a lease liability amortization table for the lease.2. Prepare all journal entries relating to the lease and the leased asset for 20X1, 20X2, and 20X3.3. How would the amounts relating to the leased asset and lease liability be shown on Lessee's statement of financial position at 31December 20X4?

Lease refers to the contract by which one part rents out an asset for a desired period of time and…

Answered: ne lease agreement, jutling machi: ave…

Business

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ne lease agreement, jutling machi: ave been obtained from Lessee's ght-line depreciation for its jutlim

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On 31 December 20X1, Lessee Ltd. entered into a lease agreement by which Lessee leased a jutling machine for six years. Annual lease
payments are $20,000, payable at the beginning of each lease year (31 December). At the end of the lease, possession of the machine
will revert to the lessor. The normal economic life for this type of machine is 8 to 10 years.
At the time of the lease agreement, jutling machines could be purchased for approximately $90,000 cash. Equivalent financing for the
machine could have been obtained from Lessee's bank at 14%.
Lessee uses straight-line depreciation for its jutling machines.
Required:
1. Prepare a lease liability amortization table for the lease.
2. Prepare all journal entries relating to the lease and the leased asset for 20X1, 20X2, and 20X3.
3. How would the amounts relating to the leased asset and lease liability be shown on Lessee's statement of financial position at 31
December 20X4?

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In calculating the amortization of a leased asset, the lessee should subtract a Select one: a. guaranteed residual value and amortize over the term of the lease. b. unguaranteed residual value and amortize over the term of the lease. c. guaranteed residual value and amortize over the life of the asset. d. unguaranteed residual value and amortize over the life of the asset. e. None of the above.
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Discuss the effectiveness of SFAS No. 13 in addressing the lease capitalizationproblem.
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Which of the following assets is always considered a separate lease component in a lease, unless the impact on the financial statements of not separating it from the other asset(s) is insignificant? Group of answer choices fully depreciated assets All of the above services associated with the lease land