On January 1, 2019, ET Mags Inc. signed a 6-year non-cancelable lease for an alloy wheel molding injection press. The terms of the lease called for ET Mags to make annual payments of $34,533.30 at the beginning of each year, starting January 1, 2019. The alloy wheel molding injection press has an estimated useful life of 6 years and a $10,000 unguaranteed residual value. The press reverts back to the lessor at the end of the lease term. ET Mags uses the straight-line method of depreciation for all of its plant assets and has an incremental borrowing rate of 6%; the lessor's implicit rate is unknown. Required: (a) Compute the present value of the minimum lease payments; round to nearest whole dollar. (b) Prepare all necessary journal entries for ET Mags covering this lease through December 31, 2020; round your entries to nearest whole dollar.
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- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?On January 1, 2019, ET Mags Inc. signed a 6-year non-cancelable lease for an alloywheel molding injection press. The terms of the lease called for ET Mags to makeannual payments of $34,533.30 at the beginning of each year, starting January 1,2019.The alloy wheel molding injection press has an estimated useful life of 6 years anda $10,000 unguaranteed residual value. The press reverts back to the lessor at theend of the lease term.ET Mags uses the straight-line method of depreciation for all of its plant assetsand has an incremental borrowing rate of 6%; the lessor’s implicit rate isunknown.Required:(a) Compute the present value of the minimum lease payments; round to nearestwhole dollar.(b) Prepare all necessary journal entries for ET Mags covering this lease throughDecember 31, 2020; round your entries to nearest whole dollar.
- On December 31, 2019, Sage Hill Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Sage Hill to make annual payments of $8,026 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Sage Hill uses the straight-line method of depreciation for all of its plant assets. Sage Hill’s incremental borrowing rate is 9%, and the lessor’s implicit rate is unknown. What type of lease is this?On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Splish Brothers to make annual payments of $8,148 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Splish Brothers uses the straight-line method of depreciation for all of its plant assets. Splish Brothers’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. I've recognized that this is a finance lease.... but I need help with the next step.... Compute the present value of the lease payments. (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.) Present value of the lease payments $On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Splish Brothers to make annual payments of $8,148 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Splish Brothers uses the straight-line method of depreciation for all of its plant assets. Splish Brothers’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Prepare all necessary journal entries for Splish Brothers for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit choose a…
- On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $7,924 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of depreciation for all of its plant assets. Kingbird’s incremental borrowing rate is 2%, and the lessor’s implicit rate is unknown. Compute the present value of the lease payments. (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.) Present value of the lease payments $enter the Present value of the lease payments in dollars Prepare all necessary journal entries for Kingbird for this lease through December 31, 2020. (Record journal entries in the order…On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Marin to make annual payments of $8,566 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Marin uses the straight-line method of depreciation for all of its plant assets. Marin’s incremental borrowing rate is 4%, and the lessor’s implicit rate is unknown.Click here to view factor tables. https://education.wiley.com/content/Kieso_Intermediate_Accounting_17e/media/simulations/interest_rate_tables.pdf a) Compute the present value of the lease payments. (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.) Present value of the lease payments $enter the Present value…On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Marin to make annual payments of $8,199 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Marin uses the straight-line method of depreciation for all of its plant assets. Marin’s incremental borrowing rate is 4%, and the lessor’s implicit rate is unknown. - Compute the present value of the lease payments - Prepare all necessary journal entries for Marin for this lease through December 31, 2020.
- On December 31, 2019, Shamrock Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Shamrock to make annual payments of $7,909 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Shamrock uses the straight-line method of depreciation for all of its plant assets. Shamrock’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. Prepare all necessary journal entries for Shamrock for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit CreditOn December 31, 2019, Shamrock Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Shamrock to make annual payments of $7,909 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Shamrock uses the straight-line method of depreciation for all of its plant assets. Shamrock’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. (a.)What type of lease is this? This is a/an _________ lease. (operating / finance) (b.) Compute the present value of the lease payments. (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.) Present value of the lease payments $ (c.) Prepare all necessary journal entries for Shamrock for this lease through…On December 31, 2019, Shamrock Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Shamrock to make annual payments of $7,909 at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4,500 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Shamrock uses the straight-line method of depreciation for all of its plant assets. Shamrock’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown. What type of lease is this? This is a finance lease. Compute the present value of the lease payments. (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.) Present value of the lease payments $34,104 Prepare all necessary journal entries for Shamrock for this lease through December 31, 2020. (Record journal…