Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
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 1P: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases...
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![Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental
payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting
the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At
the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time.
The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on
similar owned equipment.
Click here to view factor tables.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6397716d-d62c-493a-a2b8-621dd3f4e9b1%2Fccde5513-8e5c-4295-b52e-6be4243cc78c%2Flei6puc_processed.png&w=3840&q=75)
Transcribed Image Text:Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental
payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting
the payment schedule is 7%; Sheffield's incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At
the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time.
The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on
similar owned equipment.
Click here to view factor tables.
![What amounts would appear on Sheffield's December 31, 2022, balance sheet relative to the lease arrangement? (Round answers
to O decimal places, e.g. 58,971.)
SHEFFIELD STEEL COMPANY
Balance Sheet
Assets
Non-current Assets
Right-of-Use Asset
Liabilities
Lease Liability
Lease Liability
%24
%24](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6397716d-d62c-493a-a2b8-621dd3f4e9b1%2Fccde5513-8e5c-4295-b52e-6be4243cc78c%2Fbcz8l3_processed.png&w=3840&q=75)
Transcribed Image Text:What amounts would appear on Sheffield's December 31, 2022, balance sheet relative to the lease arrangement? (Round answers
to O decimal places, e.g. 58,971.)
SHEFFIELD STEEL COMPANY
Balance Sheet
Assets
Non-current Assets
Right-of-Use Asset
Liabilities
Lease Liability
Lease Liability
%24
%24
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