On January 1, 2022, Gobert Corp. leases equipment from Mitchell, Inc. The lease calls for annual payments of $80,000 to be made every January 1 from 2022 through 2030. The equipment has a ten year useful life. Gobert guarantees a residual value of $20,000 at the end of the lease term, although the equipment is expected to have no value at that time. Mitchell's implicit rate, known to Gobert, is 5%. Gobert's incremental borrowing rate is 8%. The entry to record the lease at inception will include a debit to Right-of-Use Asset of:

On January 1, 2022, Gobert Corp. leases equipment from Mitchell, Inc. The lease calls for annual payments of $80,000 to be made every January 1 from 2022 through 2030. The equipment has a ten year useful life. Gobert guarantees a residual value of $20,000 at the end of the lease term, although the equipment is expected to have no value at that time. Mitchell's implicit rate, known to Gobert, is 5%. Gobert's incremental borrowing rate is 8%. The entry to record the lease at inception will include a debit to Right-of-Use Asset of:

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

See similar textbooks

Similar questions

Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
The lessor company signs a sales-type lease agreement on January 1, 2020 to lease equipment to the lessee company. The term of the non-cancelable lease is 8 years, and yearly rental payment of $63,000 is required at the end of each year, beginning on December 31, 2020. The agreement specifies that the unguaranteed residual value is $44,000. The lessor expects to earn a return of 8% on its investment. What is the amount of sales the lessor will record on January 1, 2020? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 8%, 8 periods 1.85 0.54 10.64 5.75 6.21
On June 30, 2024, Clark, Incorporated leased warehouse equipment from Woodward, Incorporated. The lease agreement calls for Clark to make semiannual lease payments of $700,000 over a 2-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Clark's incremental borrowing rate is 10%, the same rate Woodward used to calculate lease payment amounts. Woodward manufactured the equipment at a cost of $2,220,000. Lease date Semi-annual payments Lease term Payments per year Equipment's cost Clark's incremental borrowing rate 1. Determine the price at which Woodward is 'selling' the equipment (present value of the lease payments) using Excel's PV function. 2. Prepare the journal entry to record the sale by Woodward Incorporated on June 30, 2024. Date General Journal Debit June 30, 2024 3. Prepare an amortization schedule for the 2-year term of the lease. Date June 30, 2024 December 31, 2024 June 30, 2025 December 31, 2025…
Neal Company entered into a nine-year capital lease on a warehouse on December 31, 2021. Lease payments of P520,000, which includes executory cost of P20,000 is due annually, beginning on December 31, 2022, and every December 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract was estimated at the present value of P200,000. The interest rate implicit in the lease if 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6. Question: - What amount should be reported as lease liability on December 31, 2021? A. 2,800,000B. 2,912,000C. 4,500,000D. 4,680,000 - What amount should be recognized initially as cost of the right of use asset? A. 2,800,000B. 3,000,000C. 3,112,000D. 4,700,000
On December 31, 2022, Sunland Corp. leased a machine from Eastern Star Ltd. for a five-year period. Annual lease payments are $318000 (including $14000 annual executory costs), due on December 31 each year. The first payment was made on December 31, 2022, and the second payment on December 31, 2023. The appropriate interest rate for this type of lease is 10%. The present value of the minimum lease payments at the inception of the lease (before the first payment) was $1267680. The lease is being accounted for as a finance lease by Sunland. On its December 31, 2023 statement of financial position, Sunland should report a lease liability of O $207632. Ⓒ$756048. O $963680. O $96368.
What would the annual rental payments be?
On June 30, 2024, Blue, Incorporated leased a machine from Big Leasing Corporation. The lease agreement qualifies as a finance lease and calls for Blue to make semiannual lease payments of $212,190 over a four-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Blue’s incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. Determine the present value of the lease payments on June 30, 2024, that Blue uses to record the right-of-use asset and lease liability. What would be the amounts related to the lease that Blue would report in its balance sheet at December 31, 2024? (Ignore taxes.) What would be the amounts related to the lease that Blue would report in its income statement for the year ended December 31, 2024? (Ignore taxes.)
How much is the interest expense to be recognized for the year 2022(for present value factors, do not round off)?
On December 31, 2020, Roe Company leased a machine from Colt Company for a five-year period Equal annual payments under the lease P1,050,000 including P50,000 annual executory cost and are due on December 31 of each year. The first payment was made on December 31, 2020, and the second payment was made on December 31, 2021. The five lease payments are discounted at 10% over the lease term. The present value of minimum lease payments at the inception of the lease and before the first annual payment was P4,170.000.On December 31, 2021, what amount should be reported as lease liability?
On January 1, 2021, Nets Company entered into a lease contract with Denver Company for a new equipment that had a selling price of P2,120,000. The lease contract provides that annual lease payments of P420,000 will be made for 6 years. Nets made the first payment on January 1, 2021, subsequent payments are made on December 31 of each year. Nets guarantees a residual value of P367,122 at the end of the lease term. After considering the guaranteed residual value, the rate implicit in the lease is determined to be 12%. Nets has an incremental borrowing rate of 15%. The economic life of the equipment is 9 years. Nets depreciates its equipment using the straight line method. 1. The non-current portion of the lease liability as of December 31, 2022 is: 2. The carrying amount of the equipment as of December 31, 2023 is:
On January 2, 2025, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $160000 each, payable beginning January 2, 2025. There is expected residual of $25000 but it is not guaranteed. Brick's incremental borrowing rate is 10%, however, it knows that Gold Star's implicit interest rate is 8%. The lease is appropriately classified as a finance/sales-type lease. What will Gold Star record as the sales price of the asset? 8%, 5 periods 10%, 5 periods O $689941 O $682691 O $706892 O $667179 PV Annuity Due PV Ordinary Annuity 4.31213 4.16987 3.99271 3.79079 PV Single Sum 0.68058 0.62092