On 1 March 20x4, Machine Manufacturing Co. leased a machine to Dry Goods through a three-year lease. The annual leasepayments of $24,400 start on 1 March 20X4, and continue for three years. The interest rate implicit in the lease is 7% and themachine will remain with the lessee at the end of the lease. Machines of this type are usually sold for $68,516 with a cost toMachine Manufacturing Co. of $17,400 to build.Required:1. Should this lease be accounted for as a financing-type lease or a sales-type lease?O Finance leaseO Sales lease2. What journal entries should be recorded on March 1, 20X4? (If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field.)View transacttion stJournal entry worksheet

A lease is classified as a finance lease if it transfers substantially all the risks and rewards…

Required: 1. Should this lease be accounted for as a financing-type lease or a sales-type lease? O Finance lease O Sales lease 2. What journal entries should be recorded on March 1, 20X4? (f no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Required: 1. Should this lease be accounted for as a financing-type lease or a sales-type lease? O Finance lease O Sales lease 2. What journal entries should be recorded on March 1, 20X4? (f no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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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11. Which of the following is an appropriate journal entry for the initial recognition by a lessee of a finance lease arrangement? Select one: a.DRLeased assetCRBank loan b. DRCashCRLeased asset c. DRLeased liabilityCRLeased asset d. DRLeased assetCRLease liability 12. The following lease details relate to a finance lease arrangement between Crebarn (the lessor) and Balwane (the lessee). The lease term is 3 years; 3 lease payments of $60,000 each are to be made annually in advance; a guaranteed residual of $40,000 is payable at the end of the lease term; the implicit interest rate is 13%. The present value of the lease liability is: Select one: a. $180,000. b. $187,808; c. $220,000; d. $191,400; 13. The following information relates to a lease between Canneries Limited (lessor) and Fruiterers Limited (lessee). 3 lease payments of $20,000 each are made annually in advance and a final lease payment of $15,000 is made at the end of the 3 year lease term. The implicit interest rate…
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ompany signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $80,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25,563 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Plote uses the straight-line depreciation method for all equipment. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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