Oakridge Leasing Corporation signs an agreement on January 1, 2017 to lease equipment to LeBlanc Limited. The following information relates to the agreement. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. The asset's fair value at January 1, 2017 is $80,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, which is not guaranteed. LeBlanc Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $900 to Rocky Mountain Insurance Ltd. for insurance and $1,600 to James Township for property taxes. The agreement requires equal annual rental payments of $18,143 to Oakridge, the lessor, beginning on January 1, 2017. The lessee's incremental borrowing rate is 9%. The lessor's implicit rate is 10% and is known to the lessee. LeBlanc Limited uses the straight-line depreciation method for all equipment and rounds amounts to the nearest dollar. Instructions Lessee Assume lessee Leblanc follows ASPE for requirements 1 through 3. Prepare an amortization schedule for LeBlanc Limited for the lease term. Use Excel and round all amounts to the nearest dollar. (Note: you may find the =round formula helpful for rounding in Excel.) Prepare all of LeBlanc's journal entries for 2017 and 2018 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31. Show how the lease is reported in the income statement of 2018 and the balance sheet of December 31, 2018. Redo part 1 under the assumption that LeBlanc follows IFRS Lessor Show the calculations that Oakridge, the lessor, used to arrive at the lease payment amount of $18,143. Prepare an amortization schedule for Oakridge for the lease term. Prepare all of Oakridge's journal entries for 2017 and 2018 to record the lease agreement, the lease payments and all other payments received. Assume that the lessor's annual accounting period ends on December 31 and carrying value of the equipment was $80,000. Re do Oakridge's journal entries on January 1, 2017 to record the lease agreement and the initial lease payments received. Assume that the lessor's carrying value of the equipment was $61,000.

Oakridge Leasing Corporation signs an agreement on January 1, 2017 to lease equipment to LeBlanc Limited. The following information relates to the agreement. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. The asset's fair value at January 1, 2017 is $80,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, which is not guaranteed. LeBlanc Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $900 to Rocky Mountain Insurance Ltd. for insurance and $1,600 to James Township for property taxes. The agreement requires equal annual rental payments of $18,143 to Oakridge, the lessor, beginning on January 1, 2017. The lessee's incremental borrowing rate is 9%. The lessor's implicit rate is 10% and is known to the lessee. LeBlanc Limited uses the straight-line depreciation method for all equipment and rounds amounts to the nearest dollar. Instructions Lessee Assume lessee Leblanc follows ASPE for requirements 1 through 3. Prepare an amortization schedule for LeBlanc Limited for the lease term. Use Excel and round all amounts to the nearest dollar. (Note: you may find the =round formula helpful for rounding in Excel.) Prepare all of LeBlanc's journal entries for 2017 and 2018 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31. Show how the lease is reported in the income statement of 2018 and the balance sheet of December 31, 2018. Redo part 1 under the assumption that LeBlanc follows IFRS Lessor Show the calculations that Oakridge, the lessor, used to arrive at the lease payment amount of $18,143. Prepare an amortization schedule for Oakridge for the lease term. Prepare all of Oakridge's journal entries for 2017 and 2018 to record the lease agreement, the lease payments and all other payments received. Assume that the lessor's annual accounting period ends on December 31 and carrying value of the equipment was $80,000. Re do Oakridge's journal entries on January 1, 2017 to record the lease agreement and the initial lease payments received. Assume that the lessor's carrying value of the equipment was $61,000.

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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Question

Oakridge Leasing Corporation signs an agreement on January 1, 2017 to lease equipment to LeBlanc Limited. The following information relates to the agreement.

The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years.
The asset's fair value at January 1, 2017 is $80,000.
The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, which is not guaranteed.
LeBlanc Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $900 to Rocky Mountain Insurance Ltd. for insurance and $1,600 to James Township for property taxes.
The agreement requires equal annual rental payments of $18,143 to Oakridge, the lessor, beginning on January 1, 2017.
The lessee's incremental borrowing rate is 9%. The lessor's implicit rate is 10% and is known to the lessee.
LeBlanc Limited uses the straight-line depreciation method for all equipment and rounds amounts to the nearest dollar.

Instructions

Lessee

Assume lessee Leblanc follows ASPE for requirements 1 through 3.

Prepare an amortization schedule for LeBlanc Limited for the lease term. Use Excel and round all amounts to the nearest dollar. (Note: you may find the =round formula helpful for rounding in Excel.)
Prepare all of LeBlanc's journal entries for 2017 and 2018 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31.
Show how the lease is reported in the income statement of 2018 and the balance sheet of December 31, 2018.
Redo part 1 under the assumption that LeBlanc follows IFRS

Lessor

Show the calculations that Oakridge, the lessor, used to arrive at the lease payment amount of $18,143.
Prepare an amortization schedule for Oakridge for the lease term.
Prepare all of Oakridge's journal entries for 2017 and 2018 to record the lease agreement, the lease payments and all other payments received. Assume that the lessor's annual accounting period ends on December 31 and carrying value of the equipment was $80,000.
Re do Oakridge's journal entries on January 1, 2017 to record the lease agreement and the initial lease payments received. Assume that the lessor's carrying value of the equipment was $61,000.

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