On January 1, 2020, ABC Company enters into a 4-year lease of office equipment. The rent in 2020 is P10,000 an shall increase by 10% annually starting on January 1,2022. Rentals are payable at the end of each year. ABC Co. pays the lessor a lease bonus of P5,000 on January 1, 2021. ABC Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets. How much is the lease expense in 2021?
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![On January 1, 2020, ABC Company enters into a 4-year lease of office equipment. The rent in 2020 is P10,000 an shall increase by 10% annually starting
on January 1,2022. Rentals are payable at the end of each year. ABC Co. pays the lessor a lease bonus of P5,000 on January 1, 2021. ABC Co. opts to
use the practical expedient allowed under PFRS 16 for leases of low value assets. How much is the lease expense in 2021?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F20bf6f4d-e21c-46f8-9dde-bcbd004c52c1%2F58760594-a7e2-4b5d-9041-1a043b461bbf%2F3ifmo3_processed.jpeg&w=3840&q=75)
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- edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2013. The lease terms, provisions, and related events are as follows: 11 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,00 to be made in advance at the beginning of eacy year. 2. The equipment costs $313,000. the equipment has an estimatd life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs. 4. The interest rate implicit in the leae is 14%. 5. The intial direct costs are insignificant and assumed to be zero. 6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Prepare journal entries for Edom for the years 2013 and 2014. Do not give answer in image formateWhispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Whispering’s incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Whispering uses the straight-line method of depreciation on similar owned equipment.Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
- On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $96,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 5%. Winn also paid a $321,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $417,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…The Lessor Company leases equipment to the Lessee Company on January 1, 2020. The lease is appropriately recorded as a purchase for accounting purposes for Lessee and as a sale for accounting purposes for Lessor. The lease is for a ten-year period. Equal annual payments under the lease are $30,000 and are due on January 1 of each year. The first payment is made on January 1, 2022. The cost of the equipment on Lessor's accounting records is $100,000. The equipment has an estimated useful life of ten years with no residual value expected. The of interest contemplated by Lessor and Lessee is 9 percent. Assume that the present value of the lease payments equals the market value of the equipment (selling price). Assume this is a sales-type lease. A.Prepare the entry or entries required for Lessor on January 1, 2022. A.Prepare the entry or entries required for Lessor on December 31, 2022. A.Prepare the entry or entries required for Lessor on January 1, 2023. A.Prepare the entry or entries…On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $60,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 8%. Winn also paid a $120,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…
- On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Bensen set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Instructions (Both the lessor and the lessee's accounting periods end on December 31.) a. Discuss the nature of this lease to Bensen and Flynn. b.…On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $576,798 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 12%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $4.5 million. (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. Determine the present value of the lease payments at June 30, 2021 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021?3. What pretax amounts related to the lease would…On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $60,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 5%. Winn also paid a $180,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $240,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…
- Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…Sunland Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $29,928 at the beginning of each year. The first payment is received on January 1, 2020. Sunland had purchased the machine during 2019 for $150,000. Collectibility of lease payments by Sunland is probable. Sunland set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sunland at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable $Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $500,000. 4. Ten-Care agrees to pay all executory costs directly to a third party. 5. The lease contains no renewal or bargain purchase option. 6. The interest rate implicit in the lease is 10%. 7. The initial direct costs are insignificant and assumed to be zero. 8. It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Required: 1. Next Level Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the…
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