On January 1, 2021, SRTB Company leases a fleet of stock delivery vehicles from Bray Motors, Inc. (Click the icon to view the lease terms.) Requirement a. Classify this lease agreement for both the lessor and the lessee. Begin by computing the present value of the lease payments for the lessee. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, XXXXXX Round your final answer to the nearest whole dollar.) The present value (PV) of the payments due under the lease is Before we classify the lease for the lessee and lessor, let's begin by identifying any of the Group I criteria that the lease meets. (Select all that apply) 1. The lease transfers ownership to the lessee at the end of the lease term. 2. The lessee is given an option to purchase the asset that the lessee is reasonably certain to exercise. 3. The lease term is for a major part of the economic life of the asset. 4. The present value of the sum of the lease payments and any residual value the lessee guarantees to pay (that is not otherwise included in the lease payment) is equal to substantially all of the asset's fair value. 5. The leased asset is of a specialized nature. 6. The lease does not meet any Group I lease criteria. Next identify any Group II criteria that the lease meets. (Select all that apply. If the Group II criteria do not need to be assessed based on the results from Group I, please select that choice and leave all other choices blank.) 1. The present value of the sum of the lease payments and any residual value the lessee or a third party guarantees to pay is equal to substantially all of the asset's fair value. 2. It is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. On January 1, 2021, SRTB Company leases a fleet of stock delivery vehicles from Bray Motors, Inc. (Click the icon to view the lease terms.) Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table X More info Requirements a. Classify this lease agreement for both the lessor and the lessee. b. Prepare the lease amortization table for the entire lease term. c. Prepare the journal entries necessary for Bray Motors on January 1, 2021, and on December 31, 2021. d. Prepare the journal entries necessary for SRTB Company on January 1, 2021, and on December 31, 2021. Under the terms of the lease, SRTB must pay $75,000 on January 1 of each year, beginning on January 1, 2021, over a 4-year term. The delivery vehicles have a useful life of 4 years. SRTB depreciates similar vehicles that it owns using the straight-line method. SRTB's incremental borrowing rate is 9%, and the 4% implicit rate in the lease is known to the lessee. The vehicles cost Bray Motors $280,000 and have a fair value of $283,132. Bray has no uncertainties as to future costs and collection. The lease terms do not contain a transfer of ownership, and there is no purchase option. There is also no residual value specified in the contract because no residual value is expected at the end of the lease term by the lessor. Assume that there are neither initial direct costs nor nonlease components related to the lease agreement. Print Done X

On January 1, 2021, SRTB Company leases a fleet of stock delivery vehicles from Bray Motors, Inc. (Click the icon to view the lease terms.) Requirement a. Classify this lease agreement for both the lessor and the lessee. Begin by computing the present value of the lease payments for the lessee. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, XXXXXX Round your final answer to the nearest whole dollar.) The present value (PV) of the payments due under the lease is Before we classify the lease for the lessee and lessor, let's begin by identifying any of the Group I criteria that the lease meets. (Select all that apply) 1. The lease transfers ownership to the lessee at the end of the lease term. 2. The lessee is given an option to purchase the asset that the lessee is reasonably certain to exercise. 3. The lease term is for a major part of the economic life of the asset. 4. The present value of the sum of the lease payments and any residual value the lessee guarantees to pay (that is not otherwise included in the lease payment) is equal to substantially all of the asset's fair value. 5. The leased asset is of a specialized nature. 6. The lease does not meet any Group I lease criteria. Next identify any Group II criteria that the lease meets. (Select all that apply. If the Group II criteria do not need to be assessed based on the results from Group I, please select that choice and leave all other choices blank.) 1. The present value of the sum of the lease payments and any residual value the lessee or a third party guarantees to pay is equal to substantially all of the asset's fair value. 2. It is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. On January 1, 2021, SRTB Company leases a fleet of stock delivery vehicles from Bray Motors, Inc. (Click the icon to view the lease terms.) Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table X More info Requirements a. Classify this lease agreement for both the lessor and the lessee. b. Prepare the lease amortization table for the entire lease term. c. Prepare the journal entries necessary for Bray Motors on January 1, 2021, and on December 31, 2021. d. Prepare the journal entries necessary for SRTB Company on January 1, 2021, and on December 31, 2021. Under the terms of the lease, SRTB must pay $75,000 on January 1 of each year, beginning on January 1, 2021, over a 4-year term. The delivery vehicles have a useful life of 4 years. SRTB depreciates similar vehicles that it owns using the straight-line method. SRTB's incremental borrowing rate is 9%, and the 4% implicit rate in the lease is known to the lessee. The vehicles cost Bray Motors $280,000 and have a fair value of $283,132. Bray has no uncertainties as to future costs and collection. The lease terms do not contain a transfer of ownership, and there is no purchase option. There is also no residual value specified in the contract because no residual value is expected at the end of the lease term by the lessor. Assume that there are neither initial direct costs nor nonlease components related to the lease agreement. Print Done X

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 17MCQ: Which of the following statements regarding the new accounting rules, which take effect in 2019, for...

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