On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-yeoperating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual inteof 4%. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each yecomputers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of five years with nresidual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD oPVAD of $1) (Use approprlate factor(s) from the tables provided.)

The process of recording business transactions in the books of accounts for the first time is known…

Answered: On January 1, 2021, Nath-Langstrom…

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, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $80,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 5%. Winn also paid a $100,000 advance payment at the beginning of the lease in addition to the first $80,000 lease payment. 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.Required:Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year.
On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at a cost of $1,643,565. The lease agreement specifies six annual payments of $350,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2025. The six-year lease term ending December 31, 2026 (a year after the final payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase on the basis of the increase in the Consumer Price Index for the year just ended. Thus, the first payment will be $350,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 140. Southern routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 11%. (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…
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $486,146 over a 4-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.7 million. (EV of $1. PV of $1, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) at June 30, 2018. 2. What pretax amounts related to the lease would Builders report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018? (For all requirements, enter your…
Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. ⚫ Universal earns interest under these arrangements at a 10% annual rate. • The company leased an electronic typesetting machine it purchased for $36,900 to a local publisher, Desktop Incorporated, on December 31, 2023. The lease contract specified annual payments of $8,353 beginning January 1, 2024, the beginning of the lease, and each December 31 through 2025 (three-year lease term). ⚫ The publisher had the option to purchase the machine on December 30, 2026, the end of the lease term, for $18,700 when it was expected to have a residual value of $22,700, a sufficient difference that exercise seems reasonably certain. 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: 1. Show how…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $468,683 over a five-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $3.8 million. 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: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
Sheridan Limited, a public company following IFRS 16, decided to upgrade the coffee machines in all of its office locations. Sheridan leased 53 machines from Coffee Tyme Ltd. on July 1, 2020. (To purchase the coffee machines instead would have cost Sheridan $371 per machine, and the machines would have lasted an estimated five years.) The lease calls for semi-annual payments for the next three years, in the amount of $36 per machine. The payments start on July 1, 2020. At the end of the three-year period, the machines will have to be returned to the lessor. Prepare the entry for the first payment on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation July 1 Debit Credit Would your entry for the first payment differ if Sheridan followed ASPE? The entry would be the same under ASPE.
Metlock Corporation manufactures drones. On December 31, 2019, it leased to Althaus Company a drone that had cost $102,700 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires 5 equal annual rentals of $41,200 payable each December 31, beginning December 31, 2019. An interest rate of 10% is implicit in the lease agreement. Collectibility of the rentals is probable.Prepare Metlock’s December 31, 2019, journal entries.
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $583.573 over a 4-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's Incremental borrowing rate is 11.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $3.4 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 price at which Builders is "selling" the equipment (present value of the lease payments) at June 30, 2021. 2. What amount related to the lease would Builders report in its balance sheet at December 31, 2021 (Ignore taxes)? 3. What line item amounts related to the lease would Builders report in its Income statement for the year ended December 31,…
On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $78,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 5%. Winn also paid a $285,000 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 $363,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn's fiscal year is the calendar year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollars.) 1. Record the…
Wildhorse Limited, a public company following IFRS, decided to upgrade the coffee machines in all of its office locations. Wildhorse leased 45 machines from Coffee Tyme Ltd. on July 1, 2023. (To purchase the coffee machines instead would have cost Wildhorse $315 per machine, and the machines would have lasted an estimated five years.) The lease calls for semi-annual payments for the next three years, in the amount of $30 per machine. The payments start on July 1, 2023. At the end of the three-year period, the machines will have to be returned to the lessor. Prepare the entry for the first payment on July 1, 2023. (List debit entry before credit entry. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit July 1 Would the entry for the first payment differ if Wildhorse followed ASPE? The entry ☑…

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