Speedware Corporation A friend of yours reviewed the 20X5 Annual Report for Speedware Corporation. The following are extracts from the Report. 7. Finance Subsidiaries (continued) At December 31, 20x5, receivables of $898 included $595 of notes and accounts receivable and $303 due under non-cancelable leases, maturing as follows: Year ended December 31: 20x6 Years 2-5 Thereafter Less unearned income 18. Commitments Lease receivables ($millions) Total receivables $ 159 $ 357 190 535 15 364 61 $303 67 959 61 $ 898 At December 31, 20x5, the future minimum lease payments under finance leases and operating leases consisted of: Year ended December 31: 20x6 Years 2-5 Thereafter Total future minimum lease payments Less: imputed interest Present value of net minimum lease payments Finance leases Operating leases $ 5 14 $ 132 290 9 154 28 $576 8 $20 Rental expense on operating leases for the years ended December 31, 20x5, 20x4, and 20x3, amounted to $172, $170, and $131, respectively. Your friend has asked you the following questions about the Annual Report: Required: Prepare a brief memorandum answering the questions for your friend. a. Is the firm a lessee or lessor? b. Where would the liabilities appear on the statement of financial position, and in what amounts? c. Does Speedware Corporation have any operating leases? How do you know? How are the payments accounted for by the firm? d. What entries would Speedware Corporation make to account for its leases during 20x6, based on those leases currently on the books? (Ignore any executory costs.) In other words, based on the information provided, you will not be able to determine interest costs, financing costs, or depreciation.
Speedware Corporation A friend of yours reviewed the 20X5 Annual Report for Speedware Corporation. The following are extracts from the Report. 7. Finance Subsidiaries (continued) At December 31, 20x5, receivables of $898 included $595 of notes and accounts receivable and $303 due under non-cancelable leases, maturing as follows: Year ended December 31: 20x6 Years 2-5 Thereafter Less unearned income 18. Commitments Lease receivables ($millions) Total receivables $ 159 $ 357 190 535 15 364 61 $303 67 959 61 $ 898 At December 31, 20x5, the future minimum lease payments under finance leases and operating leases consisted of: Year ended December 31: 20x6 Years 2-5 Thereafter Total future minimum lease payments Less: imputed interest Present value of net minimum lease payments Finance leases Operating leases $ 5 14 $ 132 290 9 154 28 $576 8 $20 Rental expense on operating leases for the years ended December 31, 20x5, 20x4, and 20x3, amounted to $172, $170, and $131, respectively. Your friend has asked you the following questions about the Annual Report: Required: Prepare a brief memorandum answering the questions for your friend. a. Is the firm a lessee or lessor? b. Where would the liabilities appear on the statement of financial position, and in what amounts? c. Does Speedware Corporation have any operating leases? How do you know? How are the payments accounted for by the firm? d. What entries would Speedware Corporation make to account for its leases during 20x6, based on those leases currently on the books? (Ignore any executory costs.) In other words, based on the information provided, you will not be able to determine interest costs, financing costs, or depreciation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Speedware Corporation
A friend of yours reviewed the 20X5 Annual Report for Speedware Corporation. The following are extracts from the Report.
7. Finance Subsidiaries (continued)
At December 31, 20x5, receivables of $898 included $595 of notes and accounts receivable and $303 due under non-cancelable leases, maturing
as follows:
Year ended December 31:
20x6
Years 2-5
Thereafter
Less unearned income
18. Commitments
Lease receivables
($millions)
Total receivables
$ 159
$ 357
190
535
15
364
61
$303
67
959
61
$ 898
At December 31, 20x5, the future minimum lease payments under finance leases and operating leases consisted of:
Year ended December 31:
20x6
Years 2-5
Thereafter
Total future minimum lease payments
Less: imputed interest
Present value of net minimum lease payments
Finance
leases
Operating
leases
$ 5
14
$ 132
290
9
154
28
$576
8
$20
Rental expense on operating leases for the years ended December 31, 20x5, 20x4, and 20x3, amounted to $172, $170, and $131, respectively.
Your friend has asked you the following questions about the Annual Report:
Required:
Prepare a brief memorandum answering the questions for your friend.
a. Is the firm a lessee or lessor?
b. Where would the liabilities appear on the statement of financial position, and in what amounts?
c. Does Speedware Corporation have any operating leases? How do you know? How are the
payments accounted for by the firm?
d. What entries would Speedware Corporation make to account for its leases during 20x6, based on
those leases currently on the books? (Ignore any executory costs.) In other words, based on the
information provided, you will not be able to determine interest costs, financing costs, or
depreciation.
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