On January 1, 2010, Ball Co. leases a bulldozer from CAT Co. for 4 years at $10,000 per year. The lease payments are due at the end of each year. The useful life of that bulldozer is 5 years. There is no bargain purchase option at the end of the lease term. The market interest rate is 10%. Ball Co. uses straight-line depreciation. What should Ball Co. recognize for this lease in journal entries on 1/1/2010 and 12/31/2010?

On January 1, 2010, Ball Co. leases a bulldozer from CAT Co. for 4 years at $10,000 per year. The lease payments are due at the end of each year. The useful life of that bulldozer is 5 years. There is no bargain purchase option at the end of the lease term. The market interest rate is 10%. Ball Co. uses straight-line depreciation. What should Ball Co. recognize for this lease in journal entries on 1/1/2010 and 12/31/2010?

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 2, 2018, Hernandez, Inc. signed a ten-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of P300,000 starting at the beginning of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a finance lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of P1,800,000, based on implicit interest of10%. In its 2018 income statement, what amount of interest expense should Hernandez report from this lease transaction?
Teal Mountain Company is negotiating to lease a piece of equipment to MTBA, Inc. MTBA requests that the lease be for 9 years. The equipment has a useful life of 10 years. Teal Mountain wants a guarantee that the residual value of the equipment at the end of the lease is at least $4,000. MTBA agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $2,500 at the end of the lease term.If the fair value of the equipment at lease commencement is $60,000, what would be the amount of the annual rental payments Teal Mountain demands of MTBA, assuming each payment will be made at the beginning of each year and Teal Mountain wishes to earn a rate of return on the lease of 6%? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 5,275.)
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…
Metlock Company leases a building and land. The lease term is 8 years and the annual fixed payments are $840,000. The lease arrangement gives Metlock the right to purchase the building and land for $13,550,000 at the end of the lease. Based on an economic analysis of the lease at the commencement date, Metlock is reasonably certain that the fair value of the leased assets at the end of lease term will be much higher than $13,550,000. What are the total lease payments in this lease arrangement? Total lease payments Click if you would like to Show Work for this question: Open Show Work
On January 1, 2017, Pina Corporation signed a 3-year noncancelable lease for several computers. The terms of the lease called for Pina to make annual payments of $3,200 at the beginning of each year, starting January 1, 2017. The computers have an estimated useful life of 3 years and a $590 unguaranteed residual value. The computers revert back to the lessor at the end of the lease term. Pina uses the straight-line method of depreciation for all of its property, plant, and equipment. Pina’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Compute the present value of the minimum lease payments
Grygiel Company leases a nonspecialized machine with a fair 20 value of $50,000 to Baker Company. The lease has a life of 6 years and requires a $10,000 payment at the end of each year. The lease does not include a transfer of ownership nor a bargain purchase option, and life of the lease is less than a major part of the expected economic life of the machine. It is probable at Grygiel will collect lease payments plus any amount necessary to satisfy a residual value guarantee. Round your answers to the nearest dollar. 1. Next Level If the interest rate implicit lease is 10%, compute the machine's expected residual value. 2. Next Level If the residual alue is guaranteed by Baker, how would each company classify the lease? 3. Next Level If the residual value is not guaranteed by Baker but is instead guaranteed by a third party,how would each company classify the lease?
Can you help me with this problem with step by step explanation, please?