On January 1, 2024, Lesco Leasing leased equipment to Quality Services undera finance/sales - type lease designed to earn Lesco a 12% rate of return forproviding long-term financing. The lease agreement specified: Note: Usetables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1,FVAD of $1 and PVAD of $1) Ten annual payments of $56, 000 beginningJanuary 1, 2024, the beginning of the lease and each December 31 thereafterthrough 2032. The estimated useful life of the leased equipment is 10 yearswith no residual value. Its cost to Lesco was $322,741. The lease qualifies as afinance lease/sales - type lease. A 10-year service agreement with QualityMaintenance Company was negotiated to provide maintenance of theequipment as required. Payments of $5,000 per year are specified, beginningJanuary 1, 2024. Lesco was to pay this cost as incurred, but lease paymentsreflect this expenditure. Also included in the $56,000 payments is an insurancepremium of $4,000 providing coverage for the equipment. Required: Preparethe appropriate entries for both the lessee and lessor related to the lease onJanuary 1, 2024. Prepare the appropriate entries for both the lessee and lessorrelated to the lease on December 31,

On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales - type lease designed to earn Lesco a 12% rate of return for providing long-term financing. The lease agreement specified: 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) Ten annual payments of $56,000 beginning

On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales - type lease designed to earn Lesco a 12% rate of return for providing long-term financing. The lease agreement specified: 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) Ten annual payments of $56,000 beginning

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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Please help with number 7. Thank you in advance. Bidwell Leasing purchased a single-engine plane for its fair value of $771,147 and leased it to Red Baron Flying Club on January 1, 2018.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Terms of the lease agreement and related facts were: Eight annual payments of $135,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 through 2024. Bidwell Leasing’s implicit interest rate was 11%. The estimated useful life of the plane is eight years. Payments were calculated as follows: Amount to be recovered (fair value) $ 771,147 Lease payments at the beginning of each of the next eight years: ($771,147÷ 5.7122*) $ 135,000 *Present value of an annuity due of $1: n = 8, i = 11%. Red Baron's incremental borrowing rate is 12%. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091. 7. Prepare the…
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2021. International Machines manufactured the equipment at a cost of $105,000. Manufacturers Southern's fiscal year ends December 31. (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.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $17,000 at the beginning of each period Economic life of asset 2 years Fair value of asset $127,024 Implicit interest rate 8% Required:1. Show how International Machines determined the $17,000 quarterly lease payments.2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2021, and the second lease payment on April 1, 2021.
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Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2021. Courtney purchased the equipment from Doane Machines at a cost of $252,000, its fair 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.) Related Information: Lease term Quarterly lease payments Economic life of asset Interest rate charged by the lessor Required: Prepare a lease amortization schedule and appropriate entries for Baillie Power from the beginning of the lease through December 31, 2021. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter. Complete this question by entering your answers in the tabs below. Amort Schedule General Journal 01/01/2021 03/31/2021 06/30/2021 09/30/2021 12/31/2021 03/31/2022 06/30/2022 09/30/2022 Total Prepare a lease amortization schedule. (Round your intermediate calculations and final answers to the nearest…
The following information relates to an equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $56,000 Lease term, 5 years Economic life of property, 6 years Implicit interest rate, 7% Annual lease payment due on December 31, $13,200 The equipment reverts back to the lessor at the end of the lease term. How much is recorded as the lease liability on the lease inception date? Select one: a. $66,000 b. $56,000 c. $57,911 d. $54,123
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $126,890. (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.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,700 at the beginning of each period Economic life of asset 2 years Fair value of asset $126,890 Implicit interest rate 6% (Also lessee’s incremental borrowing rate) Required:Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
Acme Auto Repair entered into an agreement to lease equipment from Cromley Motor Products on July 1, 2022, The lease calls for five equal annual payments of $420,000, beginning July 1, 2023. Similar transactions have carried an 8% interest rate. At what amount would Acme would record the right-of-use asset? (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.)
Big Bucks leased equipment to Shannon Company on July 1, 2021. The lease payments were calculated to provide the lessor a 9% return. Ten annual lease payments of $39,000 are due each July 1, beginning July 1, 2021. (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. Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be a finance lease. 2. Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be an operating lease. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be an operating lease. (If no entry is required for a…
Each of the four Independent situations below describes a sales-type lease in which annual lease payments of $110,000 are payable at the beginning of each year. Each is a finance lease for the lessee. 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) Lease term (years) Lessor's and lessee's interest rate Residual value: Estimated fair value Guaranteed by lessee A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset Lease liability S 1 1 2 770,000 7 9% Determine the following amounts at the beginning of the lease. Note: Round your Intermediate and final answers to the nearest whole dollar amount. Situation 2 770,000 Situation 7 11% $ 52,000 $ 0 880,000 770,000 S 770,000 S 880,000 S 880,000 770,000 421,213 3 $ 8,200 $ 8,200 10% 890,000 4 12% $ 52,000 $ 62,000