On January 1, 2020, Gold Company entered into a 5-yearlease of a floor of a building with the following terms:Annual rental for the first two years payableat the end of each yearAnnual rental for the next three years payableat the end of each yearInitial direct cost paid by lesseeLeasehold improvementPresent value of restoration cost required by contractUseful life of buildingImplicit interest rateDiscount rate for the restoration cost200,000300,000100,000250,00050,00020 years8%5%1.7832.577PV of an ordinary annuity of 1 at 8% for two periodsPV of an ordinary annuity of 1 at 8% for three periodsPV of 1 at 8% for two periods0.857Required:1 Compute the lease liability on January 1, 2020.2. Compute the cost of right of use asset.3. Compute the depreciation for 2020.4. Prepare a table of amortization.5. Prepare journal entries for 2020.6. Prepare the journal entry for the lease payment onDecember 31, 2022.

Name: On January 1, 2020, Gold Company entered into a 5-yearlease of a floo
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: On January 1, 2020, Gold Company entered into a 5-yearlease of a floor of a building with the following terms:Annual rental for the first two years payableat the end of each yearAnnual rental for the next three years payableat the end of each yearIn

Disclaimer: “Since you have posted a question with multiple sub-parts, we will solve first three…

Business

Accounting

On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach year Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.

On January 1, 2020, Gold Company entered into a 5-year lease of a floor of a building with the following terms: Annual rental for the first two years payable at the end ofeach year Annual rental for the next three years payable at the end of each year Initial direct cost paid by lessee Leasehold improvement Present value of restoration cost required by contract Useful life of building Implicit interest rate Discount rate for the restoration cost PV of an ordinary annuity of 1 at 8% for two periods PV of an ordinary annuity of 1 at 8% for three periods PV of 1 at 8% for two periods 200,000 300,000 100,000 250,000 50,000 20 years 8% 5% 1.783 2.577 0.857 Required: 1 Compute the lease liability on January 1, 2020. 2. Compute the cost of right of use asset. 3. Compute the depreciation for 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On December 31, 2020, Cleeneth Company leased equipment under a finance lease. Annual lease payments of P400,000 are due December 31 for 10 years. The equipment’s useful life is 10 years, and the interest rate implicit in the lease is 10%. The lease obligation was recorded on December 31, 2020 at P2,700,000 and the first lease payment was made on that date. What amount should Cleeneth Company include in current liabilities in relation to the finance lease in its December 31, 2020 statement of financial position?
Lee Company entered into a lease of warehouse on January 1, 2020. The lease contract provided the following information: Lease term 5 years Estimated useful life of the leased asset 15 years Annual rental payable at the end of each year 600,000 Interest rate implicit in the lease 12% Included in the lease agreement an option for the lessee to extend the lease term for another 5 years. At the commencement date, the exercise of the extension option is not reasonably certain. At the December 31, 2022, the lessee decided to extend the lease for further 5 years. The agreement was finalized on January 1, 2023 with following arrangement on the extension option: New annual rental payable at the end of each year 700,000 New interest rate implicit in the lease 10% REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
At the beginning of current year , EDSA company leased a building with the following information: 1) Annual fixed payment in advance at the beginning of each lease year -1,000,000 2) initial direct cost paid 350,000 3) Lease incentive received -150,000 4) Lease bonus paid to lessor before commencement of lease- 100,000 5) Present value of cost of restoring the building as required by contract discounted at 6% -200,000 6) Purchase option that is not reasonably certain to be exercised - 300,000.00 7) Lease term 5 years 8) Implicit interest rate 8% 9) PV of an annuity of 1 in advance at 8% for 5 periods 4.31 10) PV of 1 at 8% for 5 periods .68. What is the initial lease liability? 4,310,000.00 4,614,000.00 4,764,000.00 4,514,000.00 Answer fast with solution
On January 1, 2020, Chan Company entered in a five-year lease agreement with rentals of P100,000 payable at yearend for the first three years and P150,000 payable at the succeeding yearends. At an implicit interest rate of 10%, the lease liability and right of use asset was initially recorded at P475,322. The asset will revert to the lessor at a guaranteed residual value at the end of the lease term. The fair value of the asset on December 31, 2024 is P35,000. How much is the carrying amount of the lease liability on December 31, 2022? How much is the carrying amount of the right of use asset as of yearend 2021? How much is the total amount to be reflected on the 2024 profit or loss arising from the lease?
On January 1, 2020, Naruto Company leased a new machine from Sasuke Company. The following data relate to the lease transaction at the inception of the lease: Lease term 5 years Annual rental payable at beginning of each lease year 500,000 Useful life of machine 10 years Implicit interest rate 10% Present value of an annuity of 1 in advance for 5 periods at 10% 4.17 Present value of annuity of 1 in arrears for 5 periods at 10% 3.79 Fair value of the machine 2,500,000 The lease has no renewal option and the possession of the machine reverts to Sasuke when the lease terminates. At the inception of the lease, Naruto should record a lease liability of
STL enters into a 5-year lease of an item of plant on January 1, 2022. The annual rentals are P11.5 million, with the first installment paid on December 31, 2022. The present value of minimum lease payments are 50 million and the interest rate implicit in the lease is 5% per annum. Calculate the liability to be recognized in the Statement of Financial Position at December 31, 2023.
Hurricane Company leased an excavator on January 1, 2018. According to the terms of the agreement, Hurricane Company will pay 20.000 TL for 6 years, starting from July 1, 2019. The interest rate of the agreement is 9%. Hurricane Company has the option to purchase this vehicle for 5.000 TL at the end of lease period. The net present value of the future payments is 92.699,71 TL. The useful life is estimated as 10 years. The residual value is estimated as 10.000 TL. Straight-line method of depreciation is utilized. Prepare the lease amortization table and make the journal entries for this lease.
On January 2, 2021, Maroon Co., a dealer of machines, leased a machine to Green Co. Data relating to the lease are as follows: • Useful life of the equipment: 5 years • Lease term: 5 years Annual rent payable at the end of the year: P500,000 • Interest rate implicit in the lease: 10% Unguaranteed residual value: P150,000 • Initial direct cost: P20,000 The lease reverts to Maroon Co. at the end of the lease term. Note: Round-off present value factors to four decimal places. Round-off cents to peso. How much is the total interest income to be earned over the lease term?
8. On January 1, 2019, an entity leased a machinery for 4 years which is the same as the useful life of the machinery at annual rental or fixed payment of P120,000. The lease provides for a transfer of ownership of the underlying asset to the lessee at the end of the lease term. The implicit interest rate of the lease is 12%. (Do not round off the PVF). The lease payment is to be made at the end of each year. Determine the noncurrent portion of the lease liability at the end of 2019. (Round off final answer to whole number)
Autocar Company leased a machine to a lessee on January 2, 2020 under a direct financing lease with the following provisions - cost of machine $3,390,000; Annual rental payable at the end of the year $600,000; Useful life and lease term, 10 years. Autocar Company incurred and paid $143,400 in negotiation and arranging the lease. The present value of an ordinary annuity of 1 at 12% for 10 years is 5,650 and the present value of an ordinary annuity of 1 at 11% for 10 years is 5.889. What is the total financial revenue to be recognized over the lease term?
On December 31, 2020, Cleeneth Company leased equipment under a finance lease. Annual lease payments of P400,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The lease obligation was recorded on December 31, 2020 at P2,700,000 and the first lease payment was made on that date. What amount should Cleeneth Company include in current liabilities in relation to the finance lease in its December 31, 2020 statement of financial position?
Ball Company leased machinery to Denver Company on July 1, 2021, for a ten-year period expiring June 30, 2031. Equal annual payments under the lease are $250,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest used by Harter and Stine is 9%. The lease receivable before the first payment is $1,750,000 and the cost of the machinery on Ball’s accounting records was $1,550,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Ball, what amount of interest revenue would Ball record for the year ended December 31, 2021? a. $67,500 b. $135,000 c. $157,500 d. $0