On January 1, 2020, ABC Company leased a building with the following information: Annual rental payable at the end of each year 1,000,000 Initial Direct Cost Paid 400,000 Lease Incentive Received 100,000 Leasehold Improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of the building 8 years Implicit Interest Rate 10% 1. What is the cost of right of use asset? 2. What is the lease liability on December 31, 2019?

On January 1, 2020, ABC Company leased a building with the following information: Annual rental payable at the end of each year 1,000,000 Initial Direct Cost Paid 400,000 Lease Incentive Received 100,000 Leasehold Improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of the building 8 years Implicit Interest Rate 10% 1. What is the cost of right of use asset? 2. What is the lease liability on December 31, 2019?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. Lease payments are $57,000 per year and are made at the beginning of the year. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 57,000 44,000 1/1/2023 57,000 38,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)
On January 1, 2020 ABC Company leased a building to XYZ Company for a 10-year term at an annual rental of P500,000. At the inception of the lease, ABC received P2,000,000 covering the first two years' rent of P1,000,000 and a security deposit of P1,000,000. This deposit will not be returned to XYZ upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the P2,000,000 should be shown as current and noncurrent liability in ABC's December 31, 2020 statement of financial position? a. Current liability P0, Noncurrent liability P2,000,000 b. Current liability P500,000, Noncurrent liability P1,000,000 c. Current liability P1,000,000, Noncurrent liability P1,000,000 d. Current liability P1,000,000, Noncurrent liability P500,000
Myro Company leased a new machine from Myie Corp. on May 1, 2014 under a lease with the following information: Annual rental payable at beginning of each lease year P 400,000; Lease term 10 years Useful life of machine 12 years Implicit interest rate 14% Present Value of an annuity of 1 advance for 10 periods at 10 periods at 14%. 0.27 Myro has the option to purchase the machine on May 1, 2024, by paying P 500,000, which approximate the expected fair value of the machine on the option exercise date. On May 1, 2014, how much should Myro record the leased asset?
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Oscar, Inc., leased equipment from Reynolds Company on January 1, 2023. Reynolds manufactured theequipment at a cost of $200,000. The equipment has a fair value of $260,000.Information related to the lease appears below:Lease term 5 yearsFirst lease payment January 1, 2023Subsequent lease payments December 31, 2023, 2024, 2025, 2026Economic life of the equipment 6 yearsEstimated value of equipment at end of economic life $0Purchase option, reasonably expected to be exercised by Oscar $20,000Implicit and incremental borrowing rate 8% Prepare the entries to record the lease and the first payment for both the lessee and the lessor onJanuary 1, 2023.
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On January 1, 2020, Nelson Co. leased a building to Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 (unguaranteed). 2. The leased building has a cost of $4,000,000 and was purchased for cash on January 1, 2020. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $275,000 per year and are made at the beginning of the year. 5. Wise has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Wise. 6. Both the lessor and the lessee are on a calendar-year basis. Instructions a. Prepare the journal entries that Nelson should make in 2020. b. Prepare the journal entries that Wise should make in 2020. c. If Wise paid $30,000 to a real estate broker on January 1, 2020, as a fee for finding the lessor, what is the…
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