On January 1,2020, Cielo Company leased an equipment from a lessor with the following pertinent information: 500,000 8 years 10 years Annual rental payable at the end of each year Lease term Useful life of equipment Implicit interest rate 10% PV of an ordinary annuity of 1 for 8 periods at 10% PV of an annuity due of 1 for 8 periods at 10% Present value of 1 for 8 periods at 10% 5.33 5.87 0.47 The entity has the option to purchase the equipment at the end of the lease term by paying P 500,000 which is significantly lower than the expected fair value of the equipment on the option exercise date. There is reasonable certainty that the entity will exercise the option.

On January 1,2020, Cielo Company leased an equipment from a lessor with the following pertinent information: 500,000 8 years 10 years Annual rental payable at the end of each year Lease term Useful life of equipment Implicit interest rate 10% PV of an ordinary annuity of 1 for 8 periods at 10% PV of an annuity due of 1 for 8 periods at 10% Present value of 1 for 8 periods at 10% 5.33 5.87 0.47 The entity has the option to purchase the equipment at the end of the lease term by paying P 500,000 which is significantly lower than the expected fair value of the equipment on the option exercise date. There is reasonable certainty that the entity will exercise the option.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Teal Mountaln Leasing Company slgns a lease agreement on January 1, 2020, to lease electronic equipment to Sandhill Company. The term of the non-cancelable lease Is 2 years, and payments are required at the end of each year. The following Information relates to thts agreement: 1. Sandhill has the option to purchase the equlpment for S25,000 upon terminatlon of the lease. it is not reasonably certaln that Sandhill will exercse this optlon. 2. The equlpment has a cost of $300,000 and falr value of $349,000 to Teal Mountaln Leasing. The useful economic life is 2 years, with a residual value of $25,000, 3. Teal Mountaln Leasing desIres to eam a retum of 5%% en Its Investment. 4. Collectibility of the payments by Teal Mountaln Leasing Is probable. Click here bO View factor tables., Prepare the journal entries on the books of Teal Mountain Leasing to reflect the payments recelved under the lease and to recognize Income for the years 2020 and 2021. (credit account titles are automadcally…
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee. Commencement date January 1, 2020 Annual lease payment due at the beginning of each year, beginning with January 1, 2020 $113,864 Residual value of equipment at end of lease term, guaranteed by the lessee $50,000 Expected residual value of equipment at end of lease term $45,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2020 $600,000 Lessor's implicit rate 8% Lessee's incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Instructions a. Prepare an amortization schedule that would be suitable for the lessee for the lease term. b. Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease…
The following facts pertain to a non-cancelable lease agreement between X leasing co and S company a lessee commencement date may 1, 2020 annual lease payment due at the beginning of each year beginning may 1 2020. was $19,656,69 Bargian purchase option price at end of lease term $7000 lease term 5 year life of equipment 10 years lessors cost $65,000 fair value $93,000 lessors implict rate 6% lessees incremental borrowing rate 6% Prepare the journal entry on the lesseesbooks for 2020 and 2021; i have journal entries done but some things wrong Dr.right of asset 93000 cr Lease liability 93,000 to record lease lease liablitiy 19656.69 cr.cash 19656.69 to record te first lease payment Dr. interest expen AMOUNT i have wrong???cr. ______I have wrong 2021 Journal entries????
please explain answer in detail describe each and every point and step with full explantion , computation , formulation thanks
Da
1- Oman Construction Leasing Company SAOG (OCLC), a subsidiary of Muscat Grant Corporation signed a lease agreement with Muscat Mist Infustructure Companyon January 2020. The leasing company will provide drilling equipment according to following conditions: The term of lease is up to December 2023. The Lease agreement is non-cancelable and requiring equal rental payment of 200,000 OMR at the beginning of each year (Annuity due basis). Muscat Mist has approval for renewal before maturity for two times. The equipment has a fair value at the time of Lease Agreement was around OMR 980000OMR and an economic life of 2 years and no residual value.Muscat Mist pays all the executory costs directly to the third party except for the property tax of OMR 1500 per year which is included as a part of its annual payment to OOLC.Muscat MistInfustructure incremental borrowing rate is 12% per year.Muscat Mist depreciates similar equipment that it owns at a straight ling method depreciation.The targeted…
Ww.227.
Accounting On 30 June 2022, Sock Ltd leased equipment to Shoe Ltd. The equipment was in the records of Sock Ltd on 30 June 2022 at its fair value of $123,000. The lease agreement contained the following provisions: Lease term 3 years Economic life of equipment 4 years Annual rental payment, in arrears (first payment on 29/6/23) $45,000 Residual value at end of the lease term $10,000 Residual value guaranteed by lessee $4,000 Interest rate implicit in lease 8% Present value of $1 in 3 years at 8 % 0.7938 Present value of an annuity of $1 for 2 payments at 8% 1.7833 Present value of an annuity of $1 for 3 payments at 8% 2.5771 The equipment will be depreciated by Shoe Ltd on a straight-line basis. Shoe Ltd intends to return the equipment to Sock Ltd at the end of the lease term. The lease has been classified as a finance lease by Sock Ltd. Initial direct costs for setting up the lease were incurred by both parties: $855 for Shoe…
7
7