On January 1, 2021, Oriole, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs vet to be incurred by the lessor. The following information pertains to this lease agreement. a) The agreement requires equal rental payments at the beginning each year. b) The fair value of the building on January 1, 2021 is $5550000; however, the book value to Holt is $4500000. C) The building has an estimated economic life of 10 years, with no residual value. Oriole depreciates similar buildings using the straight-line method. d) At the termination of the lease, the title to the building will be transferred to the lessee. e) Oriole's incremental borrowing rate is 12% per year. Holt Warehouse Co. set the annual rental to insure a 11% rate of return. The mplicit rate of the lessor is known by Oriole, Inc. ) The yearly rental payment includes $14100 of executory costs related to taxes on the property. Click here to view factor tables. What is the annual lease payment excluding executory costs? (Rounded to the nearest dollar.) O $863107 O $294007

On January 1, 2021, Oriole, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs vet to be incurred by the lessor. The following information pertains to this lease agreement. a) The agreement requires equal rental payments at the beginning each year. b) The fair value of the building on January 1, 2021 is $5550000; however, the book value to Holt is $4500000. C) The building has an estimated economic life of 10 years, with no residual value. Oriole depreciates similar buildings using the straight-line method. d) At the termination of the lease, the title to the building will be transferred to the lessee. e) Oriole's incremental borrowing rate is 12% per year. Holt Warehouse Co. set the annual rental to insure a 11% rate of return. The mplicit rate of the lessor is known by Oriole, Inc. ) The yearly rental payment includes $14100 of executory costs related to taxes on the property. Click here to view factor tables. What is the annual lease payment excluding executory costs? (Rounded to the nearest dollar.) O $863107 O $294007

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 December 31, 2019, Barton, Inc. leased lab equipment with a fair value of $1,650,000 from Banner Rentals Co. The agreement is a six-year noncancelable lease requiring annual payments of $328,600 beginning December 31, 2019. The unguaranteed residual value is $200,000, but Barton expects the equipment to be worth $0 at the end of the lease. The lease is appropriately accounted for by Barton as a finance lease. Barton's incremental borrowing rate is 10%. Barton does not know the interest rate implicit in the lease payments is 11%. The present value of an annuity due of 1 for 6 years at 10% is 4.7908. The present value of an annuity due of 1 for 6 years at 11% is 4.6959. The present value of 1 for 6 years at 10% is 0.56447. The present value of 1 for 6 years at 11% is 0.53464. In its December 31, 2019 balance sheet, Barton should report a lease liability of 1,358,55 $1,543,073 O $1,245,657 O $1,214,473
Ondoy Company leased an asset to another entity on January 1, 2021. A third party guaranteed the residual value of the asset under the lease, estimated to be P1,200,000 on January 1, 2026, the end of the lease term. The lease is properly classified as a direct financing lease. Annual lease payments are P1,000,000 due each December 31, beginning December 31, 2021. The last payment is due December 31, 2025. Both the lessor and lessee use 10% as the interest rate. The remaining useful life of the asset is 6 years at the commencement of the lease. 1. What is the net liability balance for the lessee on December 31, 2021? 2. What is the net asset balance for the lessor on December 31, 2022?
Marin Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 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 $451,000. The fair value of the asset at January 1, 2020, is $451,000. 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 $24,225, 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 Marin is probable. Prepare an amortization schedule that is suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 5,275.) MARIN LEASING COMPANY (Lessor)Lease Amortization Schedule Date Annual Lease Payment PlusURV Interest on…
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On January 1, 2022, Yencay, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Thol Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. The fair value of the building on January 1, 2022 is P4,000,000; however, the book value to Holt is P3,300,000. The building has an estimated economic life of 10 years, with no residual value. Yencay depreciates similar buildings on the straight-line method. At the termination of the lease, the title to the building will be transferred to the lessee. Yencay's incremental borrowing rate is 11% per year. Thol Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yencay, Inc. The yearly rental payment includes P10,000 of executory costs related to taxes on the property. The agreement…
1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 | 2 22 23 24 25 25 27 28 25 30332 38 34 35 35 21 18 19 Date 20 26 29 31 33 36 37 38 (The $18,000 option to purchase does not count as a bargain purchase, the expected residual value at the end of the lease term is also $18,000.) 39 40 (a) Computation of annual payments: 1/1/20 12/31/20 12/31/21 12/31/21 Skysong Leasing Company (Lessor) Lease Amortization Schedule Interest on Lease Receivable Annual Lease Payment Account Titles Recovery of Lease Receivable Debit 1 2 Credit 3 5 6 7 8 9 Lease 10 Receivable 11 189,000 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 |33 34 35 36 37 38 39 40
3. On January 1, 2022, Verlander Corp. signs a 5-year noncancelable lease agreement to lease a backhoe from Scherzer Equipment, Inc. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $3,310 beginning on January 1, 2022. 2. The fair value of the backhoe on January 1, 2022, is $14,000. 3. The backhoe has an estimated economic life of 6 years, with an unguaranteed residual value of $1,500. Verlander depreciates similar equipment using the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the backhoe reverts to the lessor. 5. Verlander's incremental borrowing rate is 12% per year. The lessor's implicit rate is 9% and is not known by Verlander. 6. The yearly rental payment includes $450 of executory costs related to insurance on the backhoe. Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease…
Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Tamarisk Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $74,000. 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 $3,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $24,716 to the lessor, beginning on January 1, 2020. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Tamarisk uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Prepare an amortization schedule that would be…
On January 1, 2020, an entity leased a machinery with the following data: Annual rental payable at the end of each year for P80,000 with a lease term for 6 years and with an implicit rate of 7%. On January 1, 2023, the entity and the lessor agreed to amend the original terms of the lease by reducing the lease payment to P70,000 and increasing the implicit rate to 9%. Compute for the interest expense to be recognize on January 1, 2023. 15,947 18,968 14,696
Assume that on December 31, 2024, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sandhill Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66.999 beginning on December 31, 2024. 2. The fair value of the building on December 31, 2024, is $490,629. 3. 4. 5. The building has an estimated economic life of 12 years, a guaranteed residual value of $11,000, and an expected residual value of $8,100. Kimberly-Clark depreciates similar buildings on the straight-line method. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided) (a) Your answer is partially correct. Prepare the journal…
On January 1, 2020, Flower Corp. enters into an agreement with Nicki Rentals Inc. to lease a machine from them. Both corporations adhere to ASPE. The following data relate to the agreement:(i) The term of the non-cancellable lease is three years with no renewal option. Payments of $ 543,244 are due on December 31 of each year.(ii) The fair value of the machine on January 1, 2020, is $ 1,400,000. The machine has a remaining economic life of 10 years, with no residual value. The machine reverts to the lessor upon the termination of the lease.(iii) Flower depreciates all its machinery on a straight-line basis. (iv) Flower’s incremental borrowing rate is 10%. Flower does not have knowledge of the 8% implicit rate used by Nicki. (v) Immediately aftersigning the lease, Nicki discovers that Flower is the defendant in a lawsuit that is sufficiently material to make collectability of future lease payments doubtful. From Flower’s viewpoint, what type of lease is this?…