Please explain proper steps by Step and Do Not Give Solution In Image Format And Fast Answering Please &Thanks In Advance ? Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023,Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipmenthas a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment,due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the endof the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-linedepreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonablypredictable and that no additional costs will be incurred. Assume both companies follow ASPE.prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023,which is the year and for both the lessee and the LessorSandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhillleases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows:••●●...(b)cEquipment has a fair value and cost at the inception of the lease: $199,573,Guaranteed residual value: $23,000.Assume both companies follow ASPE.Annual lease payment, due at beginning of each year: $25,000.Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease.Gadget's incremental interest rate, as well as implicit rate is 7%.Gadget uses straight-line depreciation for similar equipment that it owns.Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will beincurred.Prepare the journal entries for the4 Pessor at May 30, 2023, the inception of the lease, and at December 31, 2023, whichis the year end for both the lessee and lessor. (List all debit entries before credit entries. Credit account titles are automatically indentedwhen the amount is entered. Do not indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "Noentry for the account titles and enter 0 for the amounts)4Lessee:DateAccount Titles and ExplanationDate(To record lease payment)(To record interest)(To record depreciation expense)Show Transcribed TextAccount Titles and Explanation(To record inception of lease)(To record collection of lease payment)(To record interest)ĊDebitDebitCreditCredit

The lease contains no bargain purchase option and at the end of the lease the asset is supposed to…

Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment, due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Assume both companies follow ASPE. prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023, which is the year and for both the lessee and the Lessor

Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment, due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Assume both companies follow ASPE. prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023, which is the year and for both the lessee and the Lessor

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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

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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.
Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
Ayayai Corporation (“Ayayai”) manufactures equipment with an estimated economic life of 12 years. On May 30, 2020, Ayayai leases it to Gadget Corporation (“Gadget”) for a period of 10 years. Assume both companies follow ASPE. Details of the lease are as follows: ● Equipment has a fair value and cost at the inception of the lease: $269,243. ● Guaranteed residual value: $27,000. ● Annual lease payment, due at beginning of each year: $34,000. ● Lease contains no renewal options and the equipment reverts to Ayayai at the end of the lease. ● Gadget’s incremental interest rate, as well as implicit rate is 7%. ● Gadget uses straight-line amortization for similar equipment that it owns. ● Ayayai has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Prepare the journal entries for the lessee and lessor at May 30, 2020, and at December 31, 2020, which is the year end for both the lessee and…
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What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice None of these answer choices is correct. $18,243,310 $24,000,000 $18,943,301
Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. The lease term is 10 years, non-cancelable, and requires equal rental payments of $30,000 due at the beginning of each year starting January 1, 2022. 2. The equipment has a fair value at the commencement of the lease (January 1, 2022) of $222,039 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $5,000, though Goring Dairy has guaranteed a residual value of $10,000 to King Finance. 3. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. 4. Goring Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Goring Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable.Instructions (a) Evaluate the criteria for…
Goring Dairy leases its milking equipment from King Finance Company under the following lease terms. 1. The lease term is 10 years, non-cancelable, and requires equal rental payments of $30,000 due at the beginning of each year starting January 1, 2022. 2. The equipment has a fair value at the commencement of the lease (January 1, 2022) of $222,039 and a cost of $180,000 on King Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $5,000, though Goring Dairy has guaranteed a residual value of $10,000 to King Finance. 3. The lease contains no renewal options, and the equipment reverts to King Finance upon termination of the lease. The equipment is not of a specialized use. 4. Goring Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Goring Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable.Instructions (a) Evaluate the criteria for…