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On January 1 of Year 1, Lessee Inc. leased property at a semiannual payment of $105,000, payable each January 1 and July 1 for eight years. The first payment was paid immediately. The leased property, which is new, cost $1,925,000 and has an estimated useful life of 10 years and no guaranteed residual value. The lessee's incremental borrowing rate is 7% and the lessee is not aware of the lessor's implicit rate. Required a. How would Lessee Inc. classify the lease? Finance Lease ✔ b. What balances (account titles and amounts) appear on Lessee Inc.'s balance sheet on December 31 of Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. Balance Sheet Assets Noncurrent Assets: Right-of-Use Asset Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Income Statement Expenses End of Year 1 Amortization Expense Interest Expense + 1,150,037 ✔ c. What balances (account titles and amounts) appear on Lessee Inc.'s income statement for Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. + 4 210,000 # 4 + $ $ Year 1 164,291 82,460

On January 1 of Year 1, Lessee Inc. leased property at a semiannual payment of $105,000, payable each January 1 and July 1 for eight years. The first payment was paid immediately. The leased property, which is new, cost $1,925,000 and has an estimated useful life of 10 years and no guaranteed residual value. The lessee's incremental borrowing rate is 7% and the lessee is not aware of the lessor's implicit rate. Required a. How would Lessee Inc. classify the lease? Finance Lease ✔ b. What balances (account titles and amounts) appear on Lessee Inc.'s balance sheet on December 31 of Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. Balance Sheet Assets Noncurrent Assets: Right-of-Use Asset Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Income Statement Expenses End of Year 1 Amortization Expense Interest Expense + 1,150,037 ✔ c. What balances (account titles and amounts) appear on Lessee Inc.'s income statement for Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. + 4 210,000 # 4 + $ $ Year 1 164,291 82,460

FINANCIAL ACCOUNTING
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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On January 1 of Year 1, Lessee Inc. leased property at a semiannual payment of $105,000, payable each January 1 and July 1 for eight years. The first payment was paid immediately. The leased property, which is new, cost $1,925,000 and has an estimated useful life of 10 years and no guaranteed residual value. The lessee's incremental borrowing rate is 7% and the lessee is not aware of the lessor's implicit rate. Required a. How would Lessee Inc. classify the lease? Finance Lease ÷ b. What balances (account titles and amounts) appear on Lessee Inc.'s balance sheet on December 31 of Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. Assets Noncurrent Assets: Right-of-Use Asset Balance Sheet Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Expenses Income Statement Check Amortization Expense Interest Expense + End of Year 1 + $ → $ c. What balances (account titles and amounts) appear on Lessee Inc.'s income statement for Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. 1,150,037 ✔ → $ $ 210,000 ✓ x Year 1 164,291 ✓ 82,460
Transcribed Image Text:On January 1 of Year 1, Lessee Inc. leased property at a semiannual payment of $105,000, payable each January 1 and July 1 for eight years. The first payment was paid immediately. The leased property, which is new, cost $1,925,000 and has an estimated useful life of 10 years and no guaranteed residual value. The lessee's incremental borrowing rate is 7% and the lessee is not aware of the lessor's implicit rate. Required a. How would Lessee Inc. classify the lease? Finance Lease ÷ b. What balances (account titles and amounts) appear on Lessee Inc.'s balance sheet on December 31 of Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. Assets Noncurrent Assets: Right-of-Use Asset Balance Sheet Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Expenses Income Statement Check Amortization Expense Interest Expense + End of Year 1 + $ → $ c. What balances (account titles and amounts) appear on Lessee Inc.'s income statement for Year 1 related to the lease? • Note: Round your answers to the nearest whole dollar. 1,150,037 ✔ → $ $ 210,000 ✓ x Year 1 164,291 ✓ 82,460
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