Lease right; leasehold improvementOn January 1, 2017, Anchor Company signed a 12-year lease forwarehouse space. The entity has an option to renew the lease for anadditional 8-year period on or before January 1, 2020.During January 2019, the entity made substantial improvement to thewarehouse. The cost of the improvement was P540,000 with anestimated useful life of 15 years.On December 31, 2019, the entity intended to exercise the renewaloption. The entity has taken a full year depreciation on this leaseholdimprovement for 2019.On December 31, 2019, what is the carrying amount of the leaseholdimprovement? Show your computation.

When the present value of lease payments is substantially equal to the fair value it is known as an…

Answered: On January 1, 2017, Anchor Company…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume that on December 31, 2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $164,588 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,114,500. The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an expected residual value of $34,900. Teal Mountain depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Teal Mountain's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Teal Mountain.
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $22,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $189,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. Crescent records depreciation using the straight-line method. Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What will be the effects of the lease on Crescent's earnings for the first year (ignore taxes)? (Enter decreases with negative numbers.) 2. What will be the balances in the balance sheet accounts related to the lease…
At January 1, 2018, Café Med leased restaurant equipment from Crescent Corporation under a nine-year leaseagreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2018, the beginningof the lease, and at each December 31 thereafter through 2025. The equipment was acquired recently by Crescentat a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value atthe end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at theend of the lease term of $50,995.). Both (a) the present value of the lease payments and (b) the present value ofthe residual value (i.e., the residual asset) are included in the lease receivable because the two amounts combineto allow the lessor to recover its net investment. Crescent seeks a 10% return on its lease investments. By thisarrangement, the lease is deemed to be a finance lease.Required:1. What will be the effect of the lease on…
At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. The equipment was acquired recently by Crescent at a cost of $171,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $4,666. Crescent seeks a 8% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. 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) Required: What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. What will be the…
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $24,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $162,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $52,070.) Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? (Enter decreases with negative sign.) 2. What will be…
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At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $21,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. • The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. • Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $76,604. • Crescent seeks a 8% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. 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) Required: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. 2. What will…
Monk Company, a dealer in machinery and equipment, leased equipment with a 10-year life to Leland Inc. on July 1, 2014. The lease is appropriately accounted for as a sale by Monk and as a purchase by Leland. The lease is for an eight-year period, expiring June 30, 2022. The first of eight equal payments of $300,000 is due on June 30, 2015. Leland has an option to purchase the equipment on June 30, 2022, for $100,000 even though the expected residual value at that time is $600,000. Leland’s incremental borrowing rate is 7%, and it uses straight-line depreciation. The equipment is expected to have a salvage value of zero at June 30, 2024. Required: 2. Prepare Leland’s amortization table for the leased equipment.
At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $28,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $69,847.) Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:1. What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? (Enter decreases with negative sign.)2. What will be…

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