On January 1, 2021, Packard Corporation leased equipment to Hewitt Company. The lease term is 9 years. The first payment of $458,000 was made on January 1, 2021. Remaining payments are made on December 31 each year, beginning with December 31, 2021. The equipment cost Packard Corporation $2,705,847. The present value of the lease payments is $2,733,179. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 12%, what will be the balance reported as a liability by Hewlitt in the December 31, 2022, balance sheet? (Round your final answer to nearest dollar.) Multiple Cholce $1,883,024. $2.275,179. $1,613,024. $2.090,200.

On January 1, 2021, Packard Corporation leased equipment to Hewitt Company. The lease term is 9 years. The first payment of $458,000 was made on January 1, 2021. Remaining payments are made on December 31 each year, beginning with December 31, 2021. The equipment cost Packard Corporation $2,705,847. The present value of the lease payments is $2,733,179. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 12%, what will be the balance reported as a liability by Hewlitt in the December 31, 2022, balance sheet? (Round your final answer to nearest dollar.) Multiple Cholce $1,883,024. $2.275,179. $1,613,024. $2.090,200.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: December 31, with the first payment on June 30, 2024. Geo calculate lease payment amounts.…

A: Lease:A lease is a written agreement where one party allows the another party to use his/her assets…

Q: On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease…

A: Lease is a an agreement in which usually two parties are involved one is lessor and other is the…

Q: On January 1, Year 1, Savor Corporation leased equipment to Spree Company. The lease term is 9…

A: A type of lease that provides the right to use the assets but does not provide the ownership rights…

Q: On December 31, 2019, Escapee Company leased machinery from Terminator Corporation for an…

A: Leases refer to contractual agreements in which one party, known as the lessor, grants the right to…

Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…

A: As per the accounting standard, A lease means where an asset owner gives his asset custody to some…

Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…

A: Right of use asset = Advance payment + annual payment * PVAF ( 8% , 3 years )Right of use asset=…

Q: e payments of $12,000 with the first payment due December 31. Id have financed a purchase of the…

A: Operating lease the lessor allows the lessee to use the asset but retains ownership rights.

Q: On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing…

A: Semiannual lease payment = $464,149Total semiannual payments = 4*2 = 8Incremental borrowing rate =…

Q: On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing…

A: Leasing equipment offers businesses financial flexibility by allowing them to use assets without…

Q: On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation.…

A: calculation of present value , pretax amount of liability, right of use assets, interest expenses…

Q: Need answer the question

A: To determine the liability balance that Hewlitt Company will report on its December 31, 2014,…

Q: On January 1, 2021, DIXIE KONG Corp. leased six computers for use of Accountancy Department. The…

A: An agreement of contract that is prepared to transfer the right to use the resources for a…

Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had…

A: Present value of lease :— It is calculated by multiplying periodic lease payment and present value…

Q: Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…

A: A journal entry is the first step—and an essential function—of the accounting process. Journal…

Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…

A: lease is a contract or agreement by which money is paid or received for using an equipment, building…

Q: Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending…

A: A lease is a legal agreement between a lessor (the owner of an asset) and a lessee (the user of the…

Q: On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's…

A: Variable lease payments are rental payments that fluctuate based on changes in specific factors,…

Q: On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease…

A: The objective of this question is to prepare the appropriate accounting entries for Winn Heat…

Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…

A: The lease liability is a total of the present value discounted at incremental borrowing rate, in…

Q: Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning…

A: Liabilities: In monetary bookkeeping, a liability is characterized as the future penance of…

Q: On December 31, 2021, Lang Corporation leased a ship from Fort Company for an eight-year period…

A: Lease is a financial arrangement in which one party agrees to give right of use of his assets to the…

Q: On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment…

A: Lease accounting is the process of recording the lease activities to show the financial impact of…

Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On January 1, 2021, Packard Corporation leased equipment to Hewlitt Company. The lease term is 9 years. The first payment of $458,000 was
made on January 1, 2021. Remaining payments are made on December 31 each year, beginning with December 31, 2021. The equipment cost
Packard Corporation $2,705,847. The present value of the lease payments is $2,733,179. The lease is appropriately classified as a sales-type
lease. Assuming the interest rate for this lease is 12%, what will be the balance reported as a liability by Hewlitt in the December 31, 2022,
balance sheet? (Round your final answer to nearest dollar.)
Multiple Choce
$1,883,024.
$2.275,179.
$1,613,024.
$2.090,200.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $57,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Blue’s incremental borrowing rate is 9%. Blue is unaware of the rate being used by the lessor. At the end of the lease, Blue has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blue uses the straight-line method of depreciation on similar owned equipment.Click here to view factor tables. (a) Prepare the journal entries, that Blue should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.…
Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
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 $72,000 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 8%. Winn also paid a $231,000 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 $303,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (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: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…
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
On 1 July 2020, Table Ltd leased equipment from Chair Ltd. The following are details of the equipment and the lease contract: On 1 July 2020 equipment has a fair value of $110,000 (at fair value in Chair Ltd’s accounts) Lease term is 5 years, useful life of the equipment is 6 years, and Table Ltd will return the equipment at the end of the lease term Lease payments are in advance and will be paid on 1 July of each year, starting 1 July 2020, with $24,000 as the annual payment Residual value of the equipment at the end of the lease term is $8,000, with Table Ltd guaranteeing 75% of the residual value The interest rate implicit in the lease arrangement is 6%. In setting up the lease arrangement Table Ltd incurred costs of $2,354, while Chair Ltd incurred costs of $3,141. Required: a) Prepare the necessary journal entries for Table Ltd on 1 July 2020. b) Calculate interest and depreciation expense incurred on 30 June…
Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Whispering’s incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Whispering uses the straight-line method of depreciation on similar owned equipment.
Skysong Dairy leases its milking equipment from Concord Finance Company under the following lease terms. 1. The lease term is 10 years, noncancelable, and requires equal rental payments of $32,500 due at the beginning of each year starting January 1, 2020. 2. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $244,649 and a cost of $267,000 on Concord Finance’s books. It also has an estimated economic life of 15 years and an expected residual value of $15,300, though Skysong Dairy has guaranteed a residual value of $19,700 to Concord Finance. 3. The lease contains no renewal options, and the equipment reverts to Concord Finance upon termination of the lease. The equipment is not of a specialized use. 4. Skysong Dairy’s incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Skysong Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable. A)…
Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Whispering's incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Whispering uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield’s incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment.