On January 2, 20X1, Gold Sor Lesting Company leases equipment to Brick Co. with 5 equal annual payments of $40,000, payable beginning December 31, 20X1. Brick Co. agrees to guarantee the $25,000 residual value of the asset at the end of the lease term Brick's incremental borrowing rate is 10% and Brick does not know that Gold Star's implicit interest rate is 8% Assume this is a financing type lease PV. Annuity De PV Ordinary Anity 8%, 5 periods 10%, 5periods What is the balance of the lease receivable on January 1, 20X27 431213 4.16986 3.99271 3.79079 PV Single Sum 0.68058 0.62092

On January 2, 20X1, Gold Sor Lesting Company leases equipment to Brick Co. with 5 equal annual payments of $40,000, payable beginning December 31, 20X1. Brick Co. agrees to guarantee the $25,000 residual value of the asset at the end of the lease term Brick's incremental borrowing rate is 10% and Brick does not know that Gold Star's implicit interest rate is 8% Assume this is a financing type lease PV. Annuity De PV Ordinary Anity 8%, 5 periods 10%, 5periods What is the balance of the lease receivable on January 1, 20X27 431213 4.16986 3.99271 3.79079 PV Single Sum 0.68058 0.62092

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

On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000
None
Do not give answer in image
On January 1, 2020, Most Inc. leases a machine used in its operations. The annual lease payment is $20,000 due on December 31 of 2020, 2021, 2022, and 2023. The fair value of the machine on January 1, 2020 is $69,302. The machine has no residual value. Most could borrow on a four-year collateralized loan at 6%. If the lease is accounted for as a finance lease, Most’s December 31, 2020 balance sheet would show a right-to-use asset and a finance lease liability of Select one: a. Right-to-use asset $51,976; Finance lease liability $ 53,460 b. Right-to-use asset $53,460; Finance lease liability $ 55,273 c. Right-to-use asset $60,000; Finance lease liability $ 60,000 d. Right-to-use asset $49,355; Finance lease liability $ 57,343
DO not give answer in image
At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?
me.1
7
Sagar