On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable. lease payments equal to 2% of Taco King's sales revenue, with a quarterly sales minimum of $590,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of over $745,000. Fogelman's interest rate, known by Taco King, was 8%. Note: Use Excel, or a financial calculator. Required: 1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. 2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $755,000. Amortization is recorded quarterly. Complete this question by entering your answers in the tabs below. Required 2 Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount. Required 1 View transaction list Journal entry worksheet < 1 2 < Proy 8 of 8 Next

On January 1, 2024, Taco King leased retail space from Fogelman Properties. The 10-year finance lease requires quarterly variable. lease payments equal to 2% of Taco King's sales revenue, with a quarterly sales minimum of $590,000. Payments at the beginning of each quarter are based on previous quarter sales. During the previous five-year period, Taco King has generated quarterly sales of over $745,000. Fogelman's interest rate, known by Taco King, was 8%. Note: Use Excel, or a financial calculator. Required: 1. Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. 2. Prepare the journal entries for Taco King on April 1, 2024. First quarter sales were $755,000. Amortization is recorded quarterly. Complete this question by entering your answers in the tabs below. Required 2 Prepare the journal entries for Taco King at the beginning of the lease on January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount. Required 1 View transaction list Journal entry worksheet < 1 2 < Proy 8 of 8 Next

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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Wilson Foods Corporation leased a commercial food processor on September 30, 2021. The five-year finance lease agreement calls for Wilson to make quarterly lease payments of $313,238, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2021. Wilson’s incremental borrowing rate is 12%. Wilson records amortization on a straight-line basis at the end of each fiscal year. Wilson recorded the lease as follows: September 30, 2021 Right-of-use asset (calculated below) 4,800,000 Lease payable (calculated below) 4,800,000 Lease payable 313,238 Cash (first payment) 313,238 Calculation of the present value of lease payments$313,238 × 15.3238* = $4,800,000 (rounded)*Present value of an annuity due of $1: n = 20, i = 3% Required:What would be the pretax amounts related to the lease that Wilson would report in its statement of cash flows for the year ended December 31, 2021?
On January 1, Garcia Supply leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Negotiations led to Garcia guaranteeing a $36,000 residual value at the end of the lease term. Garcia estimates that the residual value after four years will be $35,000. What is the amount to be added to the right-of-use asset and lease liability under the residual value guarantee? Note: Use tables, Excel, or a financial calculator. Enter your answer in whole dollars. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are $370000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Martinez Equipment Leasing and known to Cullumber Healthcare is 8%. Cullumber's incremental borrowing rate is 12%. The cost of the equipment on Martinez Equipment Leasing accounting records was $820000. Assuming that the lease is appropriately recorded as an operating lease, at what amount is the lease recorded on Cullumber Healthcare System's books on January 1, 2025? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 4 periods 3.57710 3.31213 0.73503 12%, 4 periods 3.40183 3.03735 0.63552 no entry to record an operating lease. $1323527 $1480000 $789167
On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate is 8%.Required:1. Calculate the present value of the lease payments. Round to the nearest whole dollar. (Hint: Use a financial calculator or Excel)2. Record the lease on June 1, 2021.
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $463,866 over a 4-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 11.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.6 million. 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) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year ended…
On January 1, 2025, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.
On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $60,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 8%. Winn also paid a $120,000 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 $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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) Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…
At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?
On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $576,798 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 12%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $4.5 million. (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. Determine the present value of the lease payments at June 30, 2021 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021?3. What pretax amounts related to the lease would…
A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. Required: Prepare a partial amortization table up to the October 1 payment. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1?
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.)
On January 1, 2024, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $58,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $378,000 and was expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Required: Prepare the appropriate journal entries for the lessor (Jamison Leasing) from the beginning of the lease through the end of 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Record the first payment received by Jamison Leasing. Record the amortization or depreciation expense for Jamison Leasing. Record the second payment received by Jamison Leasing.…