-On December 30, 20x8, Rafferty Corp. leased equipment. Annual lease payments of P20,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The present value of the lease payments on December 30, 20x8 before the first lease payment is P135,000. The first lease payment was made on that date. What amount should Rafferty include in current liabilities for this lease in its December 31, 20x8, balance sheet? a. 6,500 b. 8,500 c. 11,500 d. 20,000

-On December 30, 20x8, Rafferty Corp. leased equipment. Annual lease payments of P20,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The present value of the lease payments on December 30, 20x8 before the first lease payment is P135,000. The first lease payment was made on that date. What amount should Rafferty include in current liabilities for this lease in its December 31, 20x8, balance sheet? a. 6,500 b. 8,500 c. 11,500 d. 20,000

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

On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. What isthe present value of the operating lease?Select one:a.None of the given options is correctb.R125 000c.R64 571d.R48 188
Figy Co entered into a 4-year lease agreement on 1 January 20X5. The agreement meets the definition of a lease in accordance with IFRS 16. An initial payment of $160,000 was made on 1 January 20X5 followed by three annual payments on 1 January of $150,000 each. The rate implicit in the lease is 10%. Figy Co incurred initial direct costs of X2 to set up the lease. Required: 1. Give your own X2 then calculate the cost of the right-of-use asset as at 1 January 20X5? 2. What is the carrying amount of the lease liability at 31 December 20X6? 3. What amount will be charged to the statement of profit or loss in respect of this asset for the year ended at 31 December 20X6? 4. Prepare necessary accounting entries related to this lease agreement for the year ended at 31 December 20X5.
5. On June 30, year 1, Menchen, Inc. leased equipment from Davis Leasing. The lease agreement calls for Menchen to make semiannual lease payments of $ 400, 500 over a seven- year lease term, on June 30 and December 31. This is also the assets useful life. The first payment was due immediately on June 30, year 1. The interest rate used is the incremental borrowing rate of 11%. The cost of the asset to Davis was $ 4,051,891 using a factor of 10.11708. a. using an amortization table what amount would Davis show on its balance sheet on December 31, year 1? b. what amount would Davis show on its income statement on December 31,year 1?
On 31 December 20X0, Columbia Inc. entered into an agreement with Scotia Ltd. to lease equipment with a useful life of 6 years. Columbia Inc. will make four equal payments of $132,000 at the beginning of each lease year. Columbia Inc. anticipates that the equipment will have a residual value of $90, 400 at the end of the lease, net of removal costs. Columbia Inc. has the option of extending the lease by (1) paying $90, 400 to retain the equipment or (2) allowing Scotia Ltd. to remove it. Scotia Ltd. 's implicit interest rate in this lease is 6% . Columbia Inc.'s incremental borrowing rate is 7% . Columbia Inc. depreciates the leased equipment on a straight-line basis. The lease commences on 1 January 20X1. Assume that the fair value of the equipment on the open market is greater than the present value of the lease payments. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare a lease liability amortization table for this…
White Ltd leased a parcel of land for a period of 10 years. The lease payments required include a payment up-front of $248531, followed by another 9 payments of equal value at the end of every year up to the end of the ninth year. The implicit rate in the lease is 7 percent. What is the value of the right-of-use asset at the commencement of the lease?
*attached is the problem REQUIRED: What is the lease liability on Dec. 31, 2020? What is the lease liability to be reported as non-current on Dec 31, 2020? What is the interest expense for 2020? What is the depreciation for 2020?
At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?
S Terms of a lease agreement and related facts were as follows: a. The lease asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $20,873, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2,062 for legal fees for the lease execution were the responsibility of the lessor. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $100,000 to acquire the asset. Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest…
A lease agreement calls for annual payments of $56,979 over a 6-year period (also the asset's useful life). The lease is signed January 1, 20X1 with the first payment due on that date. The interest rate is 8%, and the PV of lease payments is $284,480. The lessor manufactured the asset at a cost of $270,000. 24. In year 20X1, the lease decreases the lessee's net income by 25. In year 20X1, the lease increases the lessor's net income by,
On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( 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%. The relevant 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 How much is the lease liability to be recognized by TRUST CO. on initial recognition? A. P880,000 B. P697,371 C. P523,029 D. P702,345
me.1