Soal 1 Blue Moon Company manufactures a reservation system with an estimated economic life of 12 years and leases it to Starship Airlines for a period of 10 years. The normal selling price of the equipment is $278,072 and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. Starship will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. Blue Moon incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. Blue Moon has determined that the implicit interest rate is 10% A. Calculate the amount of each of the following items: i. Lease Receivable ii. Sales Price iii. Cost of Sales B. Prepare a 10-year lease amortization schedule (lessor book)

Soal 1 Blue Moon Company manufactures a reservation system with an estimated economic life of 12 years and leases it to Starship Airlines for a period of 10 years. The normal selling price of the equipment is $278,072 and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. Starship will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. Blue Moon incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. Blue Moon has determined that the implicit interest rate is 10% A. Calculate the amount of each of the following items: i. Lease Receivable ii. Sales Price iii. Cost of Sales B. Prepare a 10-year lease amortization schedule (lessor book)

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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7....Stellar Industries and Pearl Inc. enter into an agreement that requires Pearl Inc. to build three diesel-electric engines to Stellar’s specifications. Upon completion of the engines, Stellar has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $370,847 each January 1, starting January 1, 2020.Stellar’s incremental borrowing rate is 8%. The implicit interest rate used by Pearl and known to Stellar is 7%. The total cost of building the three engines is $2,362,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Stellar depreciates similar equipment on a straight-line basis. At the end of the lease, Stellar assumes title to the engines. Collectibility of the lease payments is probable. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a noncancelable stated lease term of four years ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro. ● ● ● The equipment cost $390,000 to manufacture and has an expected useful life of six years. Its normal sales price is $445,205. The expected residual value of $26,000 on December 31, 2028, is not guaranteed. The first payment was made on December 31, 2024. Western Soya's incremental borrowing rate is 10%. Western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation or amortization. [Hint: A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (i.e., a BPO).] 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…
7...new...continue b Sage Industries and Pronghorn Inc. enter into an agreement that requires Pronghorn Inc. to build three diesel-electric engines to Sage’s specifications. Upon completion of the engines, Sage has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $405,443 each January 1, starting January 1, 2020.Sage’s incremental borrowing rate is 8%. The implicit interest rate used by Pronghorn and known to Sage is 7%. The total cost of building the three engines is $2,685,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Sage depreciates similar equipment on a straight-line basis. At the end of the lease, Sage assumes title to the engines. Collectibility of the lease payments is probable. (b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of…
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On January 1, 2021, Small company leased a machine from Huge Company. The following information relates to the lease: Annual rental payable in advance every January 1 - P500,000 Unguaranteed residual value - P50,000 Implicit interest rate in lease - 12% Incremental borrowing rate - 15% Lease term - 6 years Estimated useful life of the machine - 8 years (Round off the PV factor to four decimal places, then do not round off during the computation)What is the balance of Lease Liability at December 31, 2022?
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