On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of theleased asset will revert back to James. The equipment cost James $760,000 and has an expected useful life of eight years.Its normal sales price is $760,000. The residual value after six years is $100,000. Lease payments are due on December 31of each year, beginning with the first payment at the end of the first year. The interest rate is 8%.Calculate the amount of the annual lease payments.Chart to Use:Table or calculator function:Amount to be recovered (fair value)Present value of the residual valueTable or calculator function:SAmount to recovered through periodic lease paymentsLease PaymentAmount of each annual lease payment.Residual Valuen=i=n=i=Present valueLease Payments

Equipment Cost = $760,000Fair value = $760,000Lease period = 6 YearsResidual Value after 6 years =…

Answered: On January 1, James Industries leased…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…
Ball Company leased machinery to Denver Company on July 1, 2021, for a ten-year period expiring June 30, 2031. Equal annual payments under the lease are $250,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest used by Harter and Stine is 9%. The lease receivable before the first payment is $1,750,000 and the cost of the machinery on Ball’s accounting records was $1,550,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Ball, what amount of interest revenue would Ball record for the year ended December 31, 2021? a. $67,500 b. $135,000 c. $157,500 d. $0
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On 1 January 1, 20x9 Brix Co entered into an agreement to lease a machine that had an estimated life of five years. The lease period is also four years at which point the asset will be returned to the leasing company. Brix Co is required to pay for all maintenance and insurance costs relating to the asset. Annual rentals of $10,000 are payable in advance from January 1, 20x9. The machine is expected to have a nil residual value at the end of its life. The machine had a fair value of $35,000 at the inception of the lease. The lessor includes a finance cost of 10% per annum when calculating annual rentals. a) How should the lease be accounted for in the financial statements of Shrub for the year end 31 December 20x9? b) Record the journal entries for the lease…

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