On January 1, 2020 Company A leases a machine from B Corp through a contract that requires 5 payments of $10,000 every January 1, beginning on that day. The present value of the payments discounted at 10% is 42,000. The useful life of the asset is 10 years and the market value is $45,000. How should you classify the A Corp lease? A) Type of sale B) None of the above C) Operational D) Financial
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On January 1, 2020 Company A leases a machine from B Corp through a contract that requires 5 payments of $10,000 every January 1, beginning on that day. The present value of the payments discounted at 10% is 42,000. The useful life of the asset is 10 years and the market value is $45,000. How should you classify the A Corp lease?
A) Type of sale
B) None of the above
C) Operational
D) Financial
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- Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…Larkspur Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. Please answer part (b) in the image shown and fill in the entries for 12/31/25 as everything else is done already. Please fill in the remaining boxes shown. Thank you! 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $401,000. The fair value of the asset at January 1, 2020, is $401,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,050, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Larkspur is probable.Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. Instructions (Assume the accounting period ends on…
- On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is $20,000 due on December 31 of 2020, 2021, 2022, and 2023. The fair value of the machine on January 1, 2020 is $69,302. The machine has no residual value. Most could borrow on a four-year collateralized loan at 6%. If the lease is accounted for as a finance lease, Most’s December 31, 2020 balance sheet would show a right-to-use asset and a finance lease liability of Select one: a. Right-to-use asset $51,976; Finance lease liability $ 53,460 b. Right-to-use asset $53,460; Finance lease liability $ 55,273 c. Right-to-use asset $60,000; Finance lease liability $ 60,000 d. Right-to-use asset $49,355; Finance lease liability $ 57,343Wells Leasing Company signs an agreement on January 1. 2020, to lease equipment to Manchester Company. The following information relates to this agreement. The term of the non-cancellable lease is 6 years with no renewal option. 1. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is S250,000. The fair value of the asset at January 1, 2020, is $250,000. The asset will revert to the lessor at the end of the lease term, at which 3. time the asset is expected to have a residual value of $25000, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on 4. January 1, 2020. 5. Collectability of the lease payments by Windsor is probable. A. Assuming the lessor desires a 6o rate of return on its investment, calculate the amount of the annual rental payment required.On January 1 2020, Zincorne Corp. entered into an agreement to lease a specialized machine from Lessor Inc. The machinery has a current fair market value of $150,000. Details of the lease contract follow: the lease term is 5 years the economic life of the equipmement is 6 years zincorne has the option to purchase the equipment for $10,000 at the end of the lease term. The estimated value of the equipment at this time is $27,000 the implied interest rate in the lease is 8% but is not known to zincorne nor is it readily determinable zincorne's current IBR is 9% annual payments of $33,200 commence on Jnauary 1 2020 zincorne follows IFRS and has a December 31 year end What is the balance of the lease liability at the end of december 31?
- 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.…The lessor company signs a lease agreement on December 31, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $87,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $42,000. The lessor expects to earn a return of 10% on its investment. The equipment has a useful economic life of 10 years. What is the amount of lease receivable the lessor will record on December 31, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 10%, 8 periods 2.14 0.47 11.44 5.33 5.87 10%, 10 periods 2.59 0.39 15.94 6.14 6.76On January 1, 2022, Lenore Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Lenore to make annual payments of $10,000 at the beginning of each year, starting January 1, 2022. Lenore correctly accounts for the lease as a finance lease. The machine has an estimated useful life of 6 years and a $5,000 guaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Lenore uses the straight-line method of depreciation for all of its plant assets. Lenore’s incremental borrowing rate is 8% and the Lessor’s implicit rate is known to be 6%. Required: Compute the present value of the minimum lease payments for Lenore (lessee) assuming that the anticipated value of the machine at the end of the lease term will be at least $5,000. Compute the present value of the minimum lease payments for Lenore (lessee) assuming that the anticipated value of the machine at the end of the lease term will be $3,000.
- Blossom, Inc. leases a piece of equipment to Wildhorse Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $8,880 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $48,000, a book value of $43,000, and a useful life of 8 years. At the end of the lease term, Blossom expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Blossom wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automaticallySunland 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 $Wildhorse 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 $30,384 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine during 2019 for $130,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse 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 Wildhorse at the termination of the lease. (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 0 decimal places e.g. 5,275.) Amount of the lease receivable $ (b.) Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal…
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