2. On August 31, 2018, Simmons Inc. leased warehouse equipment from Covington Corp. Thelease agreement calls for Simmons to make semiannual lease payments of $50,000 over a 7-yearlease term, payable at August 31 and February 28, with the first payment on August 31, 2018.Simmons' incremental borrowing rate is 11%, the same rate Covington used to calculate leasepayment amounts. Covington purchased the warehouse equipment at a cost of $700,000 onAugust 31, 2018 with an expected useful life of 10 years and no salvage value. The fiscal yearfor both Simmons and Covington ends on December 31.Required:a. What are the present value of the lease payments on August 31, 2018?b. Starting on August 31, 2018 prepare all journal entries related to the lease that Simmons wouldhave to make through December 31, 2020.c. Starting on August 31, 2018 prepare all journal entries related to the lease that Covington wouldhave to make through December 31, 2020.d.What amounts related to the lease would Simmons report on its balance sheet on December 31,2018, December 31, 2019, and December 31, 2020?e. What amounts related to the lease would Simmons report on its income statement for the yearsending December 31, 2018, December 31, 2019, and December 31, 2020?f.What amounts related to the lease would Covington report on its balance sheet on December 31,2018, December 31, 2019, and December 31, 2020?g. What amounts related to the lease would Covington report on its income statement for the yearsending December 31, 2018, December 31, 2019, and December 31, 2020?

The answer has been mentioned below. Note: Attempting the first three subparts of the…

On August 31, 2018, Simmons Inc. leased warehouse equipmer lease agreement calls for Simmons to make semiannual lease pa lease term, payable at August 31 and February 28, with the first. Simmons' incremental borrowing rate is 11%, the same rate Co payment amounts. Covington purchased the warehouse equipm August 31, 2018 with an expected useful life of 10 years and no for both Simmons and Covington ends on December 31. Required: What are the present value of the lease payments on August 31,

On August 31, 2018, Simmons Inc. leased warehouse equipmer lease agreement calls for Simmons to make semiannual lease pa lease term, payable at August 31 and February 28, with the first. Simmons' incremental borrowing rate is 11%, the same rate Co payment amounts. Covington purchased the warehouse equipm August 31, 2018 with an expected useful life of 10 years and no for both Simmons and Covington ends on December 31. Required: What are the present value of the lease payments on August 31,

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Saved Help Seve & On January 1, 2021, Obermax Corporation agreed to lease a piece of equipment to a customer for 10 years. The lease qualified as a finance/sales-type lease with a 6% implicit interest rate. The customer agreed to make a payment of $8,000 at the beginning of each year, the first payment being made on January 1, 2021. The journal entry Obermax should recognize at the inception of the lease includes: Multiple Choice a debit to lease receivable of $80,000. a debit to lease receivable of S62,414. a credit to interest revenue of $3,265. a debit to lease receivable of $58.881.
Prepare a lease amortization schedule for Larkspur for the 5-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) LARKSPUR LEASING COMPANY (Lessor) Lease Amortization Schedule Date 5/1/20 5/1/20 5/1/21 5/1/22 5/1/23 5/1/24 4/30/25 Annual Lease Payment Plus BPO $ 14 15852.19 15852.19 15852.19 15852.19 15852.19 5000 63409 Interest on Lease Receivable 5736.26 i 4623.51 3388.35 2017.33 495,50 13748 LA Recovery of Lease Receivable 15852.19 10115.93 11228.68 12463.84 13834.86 4504.50 49661 OF
On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn Lesco a 14% rate of return for providing long-term financing. The lease agreement specified: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1). a. Ten annual payments of $59,000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $321,104. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $59,000 payments is an insurance premium…
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease ferm (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its Income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 51) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the present value of the lease upon the lease's inception. Note: Round your answers to nearest whole number and round percentage answer to 1…
ok nt ences A finance lease agreement calls for quarterly lease payments of $7,056 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $168,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required B >
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Commencement date January 1, 2020 Annual lease payment due at the beginning of each year, beginning with January 1, 2020 $113,864 Residual value of equipment at end of lease term, guaranteed by the lessee $50,000 Expected residual value of equipment at end of lease term $45,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2020 $600,000 Lessor's implicit rate 8% Lessee's incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Instructions a. Prepare an amortization schedule that would be suitable for the lessee for the lease term. b. Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease…
The following facts pertain to a non-cancelable lease agreement between Sheridan Leasing Company and Skysong Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with May 1, 2020 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2020 Lessor's implicit rate Lessee's incremental borrowing rate May 1, 2020 $15,349.90 $6,000 50 10 $65,000 $76,000 4 years years 96 The collectibility of the lease payments by Sheridan is probable. Prepare a lease amortization schedule for Skysong for the 5-year lease term
Da
The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company and Crane Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee January 1, 2025 $125,377 $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2025 $660,000 Lessor's implicit rate 8 % Lessee's incremental borrowing rate 8 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Click here to view factor tables. (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places e.g. 5,275.) Date 1/1/25 $ 1/1/25…
The following information relates to an equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $56,000 Lease term, 5 years Economic life of property, 6 years Implicit interest rate, 7% Annual lease payment due on December 31, $13,200 The equipment reverts back to the lessor at the end of the lease term. How much is recorded as the lease liability on the lease inception date? Select one: a. $66,000 b. $56,000 c. $57,911 d. $54,123
Uramilaben
Do not give answer in image