Sheffield Inc. entered into a five-year lease of equipment from Matusek Limited on July 1, 2024. The equipment has an estimated economic life of eight years and fair value of $235,000. The present value of the lease payments amounts to $202,670. The lease does not have a bargain purchase option and ownership does not transfer to Sheffield at the end of the lease.
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- 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).Pina Leasing Company agrees to lease equipment to Grouper Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2025, is $681,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Grouper estimates that the expected residual value at the end of the lease term will be $50,000. Grouper amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Pina desires a 9% rate of return on its investments. Grouper's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December…Ivanhoe Leasing Company agrees to lease equipment to Shamrock Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $569,000, and the fair value of the asset on January 1, 2025, is $682,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Shamrock estimates that the expected residual value at the end of the lease term will be $55,000. Shamrock amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Ivanhoe desires a 9% rate of return on its investments. Shamrock's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on…
- JaySage Hill Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Oriole Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. 2. Oriole has the option to purchase the equipment for $22,500 upon termination of the lease. It is not reasonably certain that Oriole will exercise this option. The equipment has a cost of $250,000 and fair value of $273,000 to Sage Hill Leasing. The useful economic life is 2 years, with a residual value of $22,500. 3. 4. Sage Hill Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Sage Hill Leasing is probable. Click here to view factor tables. (a) Prepare the journal entries on the books of Sage Hill Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account…On December 31, 2023, Reagan Incorporated signed a lease with Silver Leasing Company for some equipment having a seven-year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2029. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease. Reagan's lease amortization schedule appears below: December 31 2023 2023 2024 2025 2026 2027 Payments $ 90,000 $ 90,000 $ 90,000 $ 90,000 Multiple Choice $36.000 Interest $1,385 $ 17,165 14,251 11,221 8,070 4,793 1,385 78,779 $ 90,000 81,930 2028 $ 90,000 85,207 2029 $36,000 34,615 What is the amount of residual value guaranteed by Reagan to the lessor? $34,615 Decrease in Outstanding Balance Balance $ 90,000 72,835 75,749 Cannot be determined from the given information $ 519,115 429,115 356,280 280,531 201,752 119,822 34,615 Suomit
- Sandhill Company leases a building to Teal Mountain, Inc. on January 1, 2025. The following facts pertain to the lease agreement. 1. The lease term is 5 years, with equal annual rental payments of $3,539 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $17,800, a book value to Sandhill of $10,800, and a useful life of 6 years. At the end of the lease term, Sandhill and Teal Mountain expect there to be an unguaranteed residual value of $3,730. 4. 5. Sandhill wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Teal Mountain was unaware of the implicit rate used in the lease by Sandhill and has an incremental borrowing rate of 9%. Click here to view factor tables. How would Sandhill (lessor) and Teal Mountain (lessee) classify this lease? Sandhill would classify the lease as a Teal Mountain…Sheridan Company leases a building to Skysong, Inc. on January 1, 2020. The following facts pertain to the lease agreement. 1. The lease term is 5 years, with equal annual rental payments of $ 5,857 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $ 29,000, a book value to Sheridan of $ 22,000, and a useful life of 6 years. 4. At the end of the lease term, Sheridan and Skysong expect there to be an unguaranteed residual value of $ 5,500. 5. Sheridan wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Skysong was unaware of the implicit rate used in the lease by Sheridan and has an incremental borrowing rate of 9%. Click here to view factor tables.How would Sheridan (lessor) and Skysong (lessee) classify this lease? Sheridan would classify the lease as a…On July 1, 2023, Crane Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease a equipment from Blossom Ltd. The following information concerns the lease agreement. 1. The equipment's fair value on July 1, 2023 is $259,000. نه 3. The agreement requires equal rental payments of $58,000.00 beginning on July 1, 2023. The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $93,000. Crane Corp. depreciates similar equipment using the straight-line method, with no residual value. 4. The lease is non-renewable. At the termination of the lease, the equipment reverts to Blossom. 5. 6. Crane's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Crane Corp. The yearly rental payment includes $6,543.59 of executory costs related to insurance on the equipment. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
- Cullumber Company leases a building to Marin, Inc. on January 1, 2020. The following facts pertain to the lease agreement. 1. The lease term is 4 years, with equal annual rental payments of $3,554 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $14,000, a book value to Cullumber of $7,000, and a useful life of 5 years. 4. At the end of the lease term, Cullumber and Marin expect there to be an unguaranteed residual value of $1,750. 5. Cullumber wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Marin was unaware of the implicit rate used in the lease by Cullumber and has an incremental borrowing rate of 9%. Click here to view factor tables.How would Cullumber (lessor) and Marin (lessee) classify this lease? Cullumber would classify the lease as a…On January 30, 2025, Ivanhoe Co. leased equipment to an unaffiliated company for a lease term of three years. At the beginning of the lease, the equipment had a fair value of $344000 and a carrying value of $281100 and a remaining useful life of 5 years. A third party guarantees a residual value of $68800 at the end of the lease. The lease qualifies as a direct financing lease. What journal entry will Ivanhoe record on January 30, 2025? Lease Receivable Deferred Gross Profit Inventory Lease Receivable Deferred Gross Profit Inventory Lease Receivable Inventory Lease Receivable Cost of Goods Sold Sales Revenue Inventory 344000 275200 281100 344000 281100 62900 281100 5900 281100 281100 344000 281100Jensen Corporation leased industrial equipment to Francis Manufacturing on January 1, 2019. The following facts pertain to the lease: The lease term is 4 years. The annual lease payment is due at the beginning of each year starting on January 1, 2019. Each annual lease payment is $269,282 Ownership does not transfer at the end of the lease term and there is no bargain purchase option. The asset is not of a specialized nature. The industrial equipment has a fair value of $1,000,000, a book value to Jensen Corporation of $900,000, and a useful life of 5 years. Francis Manufacturing depreciates similar equipment using the straight-line method. The lease contains a guaranteed residual value of $50,000. The expected residual value is greater than $50,000. Jensen Corporation wants to earn a return of 8% on the lease, and collectability of the payments is probable. This rate is known by Francis…