On January 1, 20x1, Entity X (Customer) enters into a 4-year lease of equipment with Entity Y (supplier). The annual rent is P220,000 payable at the END of each year. The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight-line method of depreciation. The relevant present value factors are as follows: PV of an ordinary annuity of P1 @ 10%, n=4        3.16987 PV of an ordinary annuity of P1 @ 12%, n=4        3.03735 Requirements: 1.How much is the lease liability to be recognized by Entity X on initial recognition?   2.How much is the annual depreciation on the right-of-use asset?       3.Assume the lease is a finance lease. How much is the net investment in the lease to be recognized by Entity Y on initial recognition? 4.Assume the lease is an operating lease. How much is the lease (rent) income in 20x1?

Q: Prepare accounting journal entries for 1 July 2019 & 30 June 2020.

A: Lease is a type of option in which the lessee who does not have the asset gets the asset for the use…

Q: On January 1, 2023, Cullumber Inc. enters into a 5-year non-cancellable lease with Wilson Ltd. for…

A: A lease payment refers to the periodic payment made by a lessee to the lessor for the use and…

Q: On 1 January 20x2, TwitX Ltd (TXL) entered into a three-year non-cancellable lease agreement to…

A: The objective of the question is to calculate the lease liability and right-of-use asset for TXL as…

Q: s discounted at 10% was $53,553. The lease includes seven annual payments of $10,000. which expires…

A: Interest income is income recognized by the lessor . The lessor earns the income leasing his asset…

Q: The following information applies to Questions 15-19. On January 1, Lessor Company leases equipment…

A: Solution: % of PV of lease payment with fair value of equipment = $57,510 / $61,000 = 94.28% As PV…

Q: Oriole Corporation is a lessee with a finance lease. The asset is recorded at $720000 and has an…

A: As lease agreement provides transfer of title of asset to the lessee at the end of the lease term,…

Q: On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires…

A: Leases is a form of contract or arrangement between two parties under which one party provides it's…

Q: At the beginning of the year, Cazenovia, Inc. entered into a five-year lease for equipment that was…

A: Explanation:   REQUIRED:   What is the total expense if straight-line amortization is used for the…

Q: Ace Leasing acquires equipment and leases it to customers under long-term sales-type leases. Ace…

A: Step 2 in the solution.

Q: Show ONLY the following three-line items in the Statement of Financial Position as at 30 June 2021:…

A: A right-of-use asset, or ROU asset, represents a lessee's authority to utilize a leased item,…

Q: CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years…

A: Lease Contract: A contract between two parties, in which one party is the owner of the asset allows…

Q: Entity 5 leases a machine from ABC ltd. On 1 January 2022. The terms of the leasing contract are as…

A: It has been given that Entity 5 has leased machine from ABC Ltd.The lease has been acquired by the…

Q: Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable…

A: Capitalized cost of the asset  = ( annual rental x present value factor) + (option price x present…

Q: The lease provided for a transfer of title to the lessee at the After the fourth year, the residual…

A: Cost of Assets P79,94,000 PV of an ordinary annuity of 1 at 15% for 4 periods 2.855 Annual…

Q: On 1/1/21, Elliott Company leased machinery with a fair value of $1,185,000 from Greene Corporation.…

A: Lease is an agreement between leaser and lessee in which leaser allows lessee to use her land…

Q: year useful life and no salvage value. Sandhill, Inc.'s incremental borrowing rate is 11% and the…

A: working note:1. First, we would consider PV ANNUITY DUE i.e., 3.57710$284,152*3.57710=$1,016,440 FOR…

Q: On 30 June 2020, Cambridge Ltd leased a vehicle to Awamutu Ltd. Cambridge Ltd had purchased the…

A: What is meant by Lease? It is an agreement between two parties in which one party agrees to…

Q: CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years…

A: Using an asset temporarily in exchange for money is the subject of a lease between two parties. Many…

Q: Use the following information for #s 10-12. An entity is a manufacturer of machinery. It uses lease…

A: Lease : It is an agreement between two party for conceding an option to use  assets  as a trade-off…

Q: WBC Ltd entered into a contract to acquire a vehicle from BMW Motors. The lease term as well as the…

A: A lease is a contract between two parties (Lessor and Lessee) where lessor (owner) gives the right…

Q: BenLin Co. is a lessee under finance lease. The asset is recorded at P4,500,000 and has economic…

A:

Q: 2. Prepare the journal entries relating to the leased asset and the lease liability for 20X4 and…

A: Lease liability refers to an amount that is obliged to pay to lessees as a rent payment which is…

Q: On 1 January 20X1, T Bhd entered into a lease agreement to lease a machinery from Q Bhd (of which…

A: A lease is defined as the contract between two parties for use of an asset. The rent which the…

Q: On 31 December 20X0, Columbia Inc. entered into an agreement with Scotia Ltd. to lease equipment…

A: The objective of the question is to prepare a lease liability amortization table for Columbia Inc.…

Q: Michanga Contractors Limited acquired equipment on 1 April 2002 on a Finance Lease.   The Finance…

A: Lease is an agreement between lessor and lessee to use the assets of the lessee. There are two types…

Q: Alia Company leased an asset to Lion Company and appropriately accounted for the lease as a direct…

A: Below given is the answer with full explanation

Q: Ground Company leased a parcel of land to Sparks Company for six years. The lease agreement states…

A: An agreement between two parties one that provides the asset called the lessor and the one who…

Q: Crane, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments…

A: In the question, Crane Inc. leased the equipment for 4 years and made the leased payment of Rs.…

Q: AS ACZ signed a 20x1 5-year lease agreement. According to this, AS ACZ must pay 5 equal payments…

A: In order to classify a lease as a capital lease any of the following conditions must be met a) There…

Q: On 1 January 2020, the company had entered into a five-year lease agreement for an office space with…

A: Financial lease is that lease where lessor has given right to use the assets to lessee  which cover…

Q: On 1 January 2020, Moon Co entered into a five-year lease of equipment which has a remaining useful…

A: Lease is a contractual agreement under which one party gives its asset to another party for using…

Q: Metlock Company leases a building and land. The lease term is 8 years and the annual fixed payments…

A: A lease grants the right to use other individuals' software, fixed asset, real estate, etc for a…

Q: Franklin Co. leased its manufactured equipment to Parker Inc. for a four-year term. Franklin Co.…

A: When the underlying assets are derecognized and also the net of investments in the lease is taken in…

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.