On January 1, Lessor Company leases equipment to Lessee Company. The lease term is 8 years; the economic life of the asset is 12 years. The cost of the equipment is $36,000; its fair value is $61,000. Lessor’s implicit rate is 7%; Lessee’s incremental borrowing rate is 7%. Lease payments of $9000 are due at the beginning of each year (PV $57,510).  At the end of the lease term, the asset is expected to have a residual value of $6000 (PV  $3492), none of which is guaranteed by Lessee.   Which of the following is true at the inception of the lease? The ROU asset is recorded if the lease is a finance lease but not if it is an operating lease. The ROU asset is recorded if the lease is an operating lease but not if it is a finance lease. Lessor considers the unguaranteed residual value as a source for recovering its investment when computing the periodic lease payments. Lessee would add in the present value of the residual value if guaranteeing it for the full $6000 when recording the ROU asset.

Q: 000, and payments are due at the beginning of each lease year. The lease contains a purchase option…

A: Given as, Fair value= $600, 000, Lease term= 5 years.

Q: A finance lease agreement calls for quarterly lease payments of $7,728 over a 10-year lease term,…

A: a.DateLease paymentEffective interestDecrease in balanceOutstanding balanceJuly 1   184,000July…

Q: January 1, 20x2, James Industries entered into an agreement to lease equipment to Espir alifies as a…

A: When equipment is given on lease than the payments from the clients are received and these payments…

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: Cazenovia, Inc. entered into a five-year lease for equipment that was valued at $95,000. The company…

A: As per IFRS 16, LEASES Lease liability that should be recognised on commencement of lease is present…

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: On January 1, Year 1, Savor Corporation leased equipment to Spree Company. The lease term is 9…

A: A type of lease that provides the right to use the assets but does not provide the ownership rights…

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: On 1 July 2020, the company had entered into a five-year lease agreement for an asset with RF…

A: Amount charged to Income statement = Interest expense + Amortization Expense

Q: On January 1, 20X1, Babson, Inc., leased two automobiles for executive use. The lease requires…

A: A finance lease, commonly referred to as a capital lease, is a form of lease agreement in which the…

Q: payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest…

A: A journal entry is an accounting entry which is used to record a business recorded in the accounting…

Q: Required: 1. Calculate the ROU asset. (Round your intermediate calculations and final answer to the…

A: Lease agreement: It is an agreement or contract between two parties to transfer the right to use the…

Q: The lease asset had a retail cash selling price of $110,000. Its useful life was six years with no…

A: Leased asset depreciation: $110,000 / 6 = $18,333

Q: Company A leases equipment from Company B in a finance lease. Lease payments of $3,226 are due…

A: The right-to-use asset is the amount that is recorded by the lessee in its balance sheet that…

Q: A lease agreement that qualifies as a finance lease calls for annual lease payments of $30,000 over…

A: A lease is a contractual agreement between two parties, known as the lessor and the lessee, in which…

Q: Warrior Inc. leased a commercial generator from Portland Inc. on January 1, 2021 under a 2-year…

A: Step 1 Lease is type of assets acquisition to acquire the assets ,for right to use in exchange of…

Q: The following relate to an operating lease agreement: The lease term is 3 years, beginning January…

A: Journal entries refers to the entries which are made at the end of the period through the companies…

Q: 12. Brandy Bottling signs an agreement on January 1, 20X4, to lease office equipment for a 5-year…

A: Date Particulars Debit  Credit a. Jan 1 Equipment leasehold $219,758       Capital lease…

Q: The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value…

A: Lease refers to the contract in which owner of the equipment allows another party to use the…

Q: Boyce Company leased a music studio from Justine company on a 6-year lease term at P250,000 annual…

A: Annual lease payment=P250000Price at the end of 6 years=P200000Interest rate=12%Economic life=10…

Q: A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over…

A: An agreement of contract that is prepared to transfer the right to use the resources for a…

Q: On January 1, Year 1, Tucker Company leases equipment from Franz Inc. over three years of the…

A: A lease is defined as a contractual agreement incorporated between two business entities where one…

Q: On January 1, Lessee Company leases equipment with a useful life of 5 years for a 3-year lease term.…

A: Option 1 is the Correct answer  i.e  Lease expense at the end of the first year is $52,000.

Q: On 1 January 20X1, Dynamic entered into a three year lease for a lorry. Lease payments are $10,000…

A: Cash inflows for first two years = $10000 Cash inflow for third year = $15000 Discount rate = 5%…

Q: Red Co. recorded a right-of-use asset of $110,000 in a 10-year finance lease. Payments of $17,902…

A: LEASE FINANCING A Lease is an agreement whereby the Lessor conveys to the Lessee in Return for a…

Q: Ball Company leased machinery to Denver Company on July 1, 2021, for a ten-year period expiring June…

A: A lease is a contract between two parties, the lessor and the lessee. The lessor is the owner of the…

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.