On June 1, 2024, First National leased a building. The lease agreement calls for First National to make lease payments of $3,627.06 each month for the next two years, with the first lease payment beginning June 30. The company's normal borrowing rate is 7%. Required: 1. Calculate the present value of the lease payments. (Hint: Use a financial calculator or Excel.) 2. Record the lease on June 1, 2024. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the present value of the lease payments. (Hint: Use a financial calculator or Excel.) (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Present value of lease payments Required 2 >

On June 1, 2024, First National leased a building. The lease agreement calls for First National to make lease payments of $3,627.06 each month for the next two years, with the first lease payment beginning June 30. The company's normal borrowing rate is 7%. Required: 1. Calculate the present value of the lease payments. (Hint: Use a financial calculator or Excel.) 2. Record the lease on June 1, 2024. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the present value of the lease payments. (Hint: Use a financial calculator or Excel.) (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Present value of lease payments Required 2 >

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, 2022, ABC Company signed a 5-year non-cancelable lease for a building. This is also the period when the contract is enforceable.The terms of the lease called the ABC to make annual payments of P500,000 at the beginning of each year starting January 1, 2022. The contract provides that ABC will obtain the ownership at the end of the lease term. The building has an estimated useful life of 6 years and a P120,000 guaranteed residual value at the end of the five-year lease term. ABC has a constructive obligation to restore the machine to a condition still suitable for use at the end of the lease term. Estimated cost of restoration is P200,000. ABC incurred directly attributable cost of P90,000 to install the machine. The rate implicit in this contract is not readily determinable at the time of inception of the contract and incremental borrowing rate is at 9%. At what amount should ABC record the leased asset at January 1, 2022?
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $486,146 over a 4-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.7 million. (EV of $1. PV of $1, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) at June 30, 2018. 2. What pretax amounts related to the lease would Builders report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018? (For all requirements, enter your…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $468,683 over a five-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $3.8 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
) On January 1, 2022, Buxton Corp. signed a 6 year lease. Buxton Corp. will make payments of $96,525 each year on January 1st, with the first payment made on the day the lease was signed. If the lease payments had an initial present value of $462,431 and Buxton Corp.'s incremental interest rate is 10%, how much interest expense will the company recognize on its 2022 income statement from this finance lease? (IFO 13 & 15) ○ $46,243 O $36,591 O $0 O $96,525
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease ferm (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its Income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 51) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the present value of the lease upon the lease's inception. Note: Round your answers to nearest whole number and round percentage answer to 1…
Help with parts 4 and 5. 4. Prepare journal entries for Sax for the years 2016 and 2017. 5. Next Level If the lease term is 3 years and the annual payment is $110,000, how would Sax classify the lease under (a) U.S. GAAP and (b) IFRS?
On January 1, 2022, ABC Company signed a 5-year non-cancelable lease for a building. This is also the period when the contract is enforceable.The terms of the lease called the ABC to make annual payments of P500,000 at the beginning of each year starting January 1, 2022. The contract provides that ABC will obtain the ownership at the end of the lease term. The building has an estimated useful life of 6 years and a P120,000 guaranteed residual value at the end of the five-year lease term. ABC has a constructive obligation to restore the machine to a condition still suitable for use at the end of the lease term. Estimated cost of restoration is P200,000. ABC incurred directly attributable cost of P90,000 to install the machine. The rate implicit in this contract is not readily determinable at the time of inception of the contract and incremental borrowing rate is at 9%. How much depreciation expense will be taken up by ABC?
Pinky Enterprises entered into a real estate lease agreement for a new building on March 1, 2023. The lease is an operating lease and is fully executed on that day. Recognizing that it will take a few months for business to be in full swing, Pinky was able to negotiable for 6 months of free rent before rent payments will commence. Accordingly, the terms of the lease require Pinky to make 54 consecutive payments of $24,600 per month beginning on September 1, 2023. The lease term spans five years. Pinky's financial year-end is December 31, 2023. What amount will Pinky record as its lease expense with respect to this building for the year ended December 31, 2023? a. $221,400 O b. $199,260 O c. $98,400 O d. $246,000
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $463,866 over a 4-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 11.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.6 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What line item amounts related to the lease would Builders report in its income statement for the year ended…
Cullumber Company signed a lease for an office building for a period of 9 years. Under the lease agreement, a security deposit of $7,200 is made. The deposit will be returned at the expiration of the lease with interest compounded at 6% per year. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What amount will Cullumber receive at the time the lease expires? (Round answer to 2 decimal places, e.g. 25.25.) Amount at the time the lease expires
Zachariah City's water utility fund enters into a five-year lease for maintenance equipment on July 1, 2022. The City's fiscal year end is December 31, 2022. Assuming lease payments are $50,000, the interest rate is 5%, and the present value of the lease payments is $227,298. 1. Record any necessary entry at the inception of the lease. 2. Record the first lease payment of $50,000 on July 2, 2022. 3. Record any necessary amortization on December 31, 2022. 4. Record the second lease payment of $50,000 on July 2, 2023. Reset. Now show me what these four journal entries would be if it had been the City's general fund that entered into the lease.
On July 1, 2020, Shroff Company leased a warehouse building under a 10-year lease agreement. The lease requires quarterly lease payments of $4,500. The first lease payment is due on September 30, 2020. The lease was reported as a finance lease using an 8% annual interest rate. a. Prepare the journal entry to record the commencement of the lease on July 1, 2020. b. Prepare the journal entries that would be necessary on September 30 and December 31, 2020. c. Post the entries from parts a and b in their appropriate T-accounts. d. Prepare a financial statement effects template to show the effects template to show the effects of the entries from parts a and b on the balance sheet and income statement.