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…

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

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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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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.
At the beginning of the current year, CPA Co, leased a machine to CMA Co. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual payments of P1,750,000 are made each December 31. The machine reverts to lessor at the end of the lease term, at which the residual value of the machine will be P275,000 which is unguaranteed.Required: Write answer without peso sign withcommas.What is the total financial revenue?
On Jan 1, 20x1, Panda Yummy entered into an agreement to lease packaging equipment from RCT financing. The lease was for 6 years, commencing immediately on January 1, 20x1. Under the agreement, Panda Yummy would make a lease payment of $24,000 at the beginning of each of the 6 years. The equipment was expected to have an economic life of 1O years. Under the agreement, Panda Yummy had the option of purchasing the packaging equipment for $2,000 at the end of the lease term, when the equipment was expected to be worth $8,000. The lessor's rate of return on the leasing arrangement was 7% Panda Yummy had a year-end of Dec 31. Required Prepare an amortization table for Panda Yummy for the lease. Prepare all Journal entries for 20x1 and 20X2 Prepare the journal entries that Panda Yummy would make when exercising the bargain purchase option at the end of the lease term.
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Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…
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On January 1, 20x1, Entity X (Customer) enters into a 4-year lease of equipment with Entity Y (supplier). The annual rent is P220,000 payable at the END of each year. The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight-line method of depreciation. The relevant present value factors are as follows: PV of an ordinary annuity of P1 @ 10%, n=4 3.16987 PV of an ordinary annuity of P1 @ 12%, n=4 3.03735 Requirements: 1.How much is the lease liability to be recognized by Entity X on initial recognition? 2.How much is the annual depreciation on the right-of-use asset? 3.Assume the lease is a finance lease. How much is the net investment in the lease to be recognized by Entity Y on initial recognition? 4.Assume the lease is an operating lease. How much is the lease (rent) income in 20x1? 5.Assume the lease qualifies for accounting as…
On 1 March 20x4, Machine Manufacturing Co. leased a machine to Dry Goods through a three-year lease. The annual lease payments of $24,400 start on 1 March 20X4, and continue for three years. The interest rate implicit in the lease is 7% and the machine will remain with the lessee at the end of the lease. Machines of this type are usually sold for $68,516 with a cost to Machine Manufacturing Co. of $17,400 to build. Required: 1. Should this lease be accounted for as a financing-type lease or a sales-type lease? O Finance lease O Sales lease 2. What journal entries should be recorded on March 1, 20X4? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transacttion st Journal entry worksheet
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