Rajiv Industries leased exercise equipment to Woodson Gyms on July 1, 2024. Rajiv recorded the lease receivable at $810,000, the present value of lease payments discounted at 10% and fair value of the equipment. The lease called for ten annual lease payments of $120,000 due at the beginning of each year. The first payment was received on July 1, 2024. Rajiv had manufactured the equipment at a cost of $750,000. With this lease agreement, control is considered to be transferred to the lessee at the beginning of the lease. What is the total increase in earnings (pretax) on Rajiv’s 2024 income statement?

Rajiv Industries leased exercise equipment to Woodson Gyms on July 1, 2024. Rajiv recorded the lease receivable at $810,000, the present value of lease payments discounted at 10% and fair value of the equipment. The lease called for ten annual lease payments of $120,000 due at the beginning of each year. The first payment was received on July 1, 2024. Rajiv had manufactured the equipment at a cost of $750,000. With this lease agreement, control is considered to be transferred to the lessee at the beginning of the lease. What is the total increase in earnings (pretax) on Rajiv’s 2024 income statement?

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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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
On January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $60,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 8%. Winn also paid a $120,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…
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