On January 1, Refuge Sales Company entered into a lease agreement to lease a piece of machinery for a period of 5 years from Big Boy Equipment (BBE). i (Click the icon to view the details of the lease.) Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table Read the requirements. Requirement a. Prepare the entries for the lessor, BBE, for the first year of the lease. Determine the implicit rate. (Assume that Big Boy does not obtain a third-party guarantee of the residual value.) Begin by computing the implicit rate in the lease. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Enter your answer as a whole percentage rounded to four decimal places, X.XXXX%.) The implicit rate in the lease is %. Next compute the present value of the lease payments. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. If using a financial calculator or a spreadsheet for your calculation, enter the interest rate as a decimal rounded to six decimal places, X.XXXXXX. Round your final answer to the nearest whole dollar.) The present value (PV) of the payments due under the lease is More info The machine is not specialized for Refuge's business needs, has a sales price of $74,000, and its useful life is 7 years with no guaranteed residual value. The $16,000 annual rentals are due on January 1 of each year. The lease does not contain a transfer of ownership or a purchase option. Assume that there are no initial direct costs associated with this lease. There are also no nonlease components. BBE's implicit rate is not known to Refuge whose incremental borrowing rate is 11%. The carrying value of the equipment to BBE is $74,000, its fair value. Assume that collectability of all lease payments is reasonably assured. Refuge's fiscal year ends on December 31. >

On January 1, Refuge Sales Company entered into a lease agreement to lease a piece of machinery for a period of 5 years from Big Boy Equipment (BBE). i (Click the icon to view the details of the lease.) Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table Read the requirements. Requirement a. Prepare the entries for the lessor, BBE, for the first year of the lease. Determine the implicit rate. (Assume that Big Boy does not obtain a third-party guarantee of the residual value.) Begin by computing the implicit rate in the lease. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Enter your answer as a whole percentage rounded to four decimal places, X.XXXX%.) The implicit rate in the lease is %. Next compute the present value of the lease payments. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculation. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. If using a financial calculator or a spreadsheet for your calculation, enter the interest rate as a decimal rounded to six decimal places, X.XXXXXX. Round your final answer to the nearest whole dollar.) The present value (PV) of the payments due under the lease is More info The machine is not specialized for Refuge's business needs, has a sales price of $74,000, and its useful life is 7 years with no guaranteed residual value. The $16,000 annual rentals are due on January 1 of each year. The lease does not contain a transfer of ownership or a purchase option. Assume that there are no initial direct costs associated with this lease. There are also no nonlease components. BBE's implicit rate is not known to Refuge whose incremental borrowing rate is 11%. The carrying value of the equipment to BBE is $74,000, its fair value. Assume that collectability of all lease payments is reasonably assured. Refuge's fiscal year ends on December 31. >

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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