Brief Exercise 15-16 (Algo) Lessor's Initial direct costs; sales-type lease [LO15-3, 15-7]Bryant leased equipment that had a retall cash selling price of $700,000 and a useful life of four years with no residual value. Thelessor spent $580,000 to manufacture the equipment and used an implicit rate of 9% when calculating annual lease payments of$198.228 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incrementalcosts of consummating the lease transaction incurred by the lessor were $20,000.What is the effect of the lease on the lessor's earnings during the first year, not including any effect of depreciation no longer requiredon the asset under lease (Ignore taxes)?Note: Input decreases to Income as negative amounts.Impact on lessor's pretax earnings

Meaning of lease : A lease refers to a contract where one party grants a right to use a property or…

ssor spent $580,000 to manufacture the equipment and u 198,228 beginning January 1, the beginning of the lease. L osts of consummating the lease transaction incurred by the That is the effect of the lease on the lessor's earnings duri

ssor spent $580,000 to manufacture the equipment and u 198,228 beginning January 1, the beginning of the lease. L osts of consummating the lease transaction incurred by the That is the effect of the lease on the lessor's earnings duri

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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2...new.continue...c The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Crane Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term, guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Suppose Crane received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $enter a…
The following facts pertain to a non-cancelable lease agreement between Sheridan Leasing Company and Skysong Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with May 1, 2020 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2020 Lessor's implicit rate Lessee's incremental borrowing rate May 1, 2020 $15,349.90 $6,000 50 10 $65,000 $76,000 4 years years 96 The collectibility of the lease payments by Sheridan is probable. Prepare a lease amortization schedule for Skysong for the 5-year lease term
On January 1, Hazard Company, a lessee, entered into three noncancelable leases for brand new general equipment: Lease J, Lease K, and Lease L. None of the three leases transfer ownership of the equipment to Hazard at the end of the lease term. For each of the three leases, the present value of the lease payments at the beginning of the lease term, excluding that portion of the payments representing executory costs, is 75% of the fair value of the equipment to the lessor at the inception of the lease. Each piece of equipment has an expected economic life of 5 years. The following information is peculiar to each lease: Lease J does not contain a bargain purchase option. The lease term is equal to 60% of the estimated economic life of the equipment. Lease K contains a bargain purchase option. The lease term is equal to 60% of the estimated economic life of the equipment. Lease L does not contain a bargain purchase option. The lease term is for 12 months. Required: Explain…
The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company and Crane Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, 2025 Residual value of equipment at end of lease term, guaranteed by the lessee January 1, 2025 $125,377 $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, 2025 $660,000 Lessor's implicit rate 8 % Lessee's incremental borrowing rate 8 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Click here to view factor tables. (a) Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places e.g. 5,275.) Date 1/1/25 $ 1/1/25…
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee. Commencement date Annual lease payment due at the beginning of each year, beginning with January 1, Residual value of equipment at end of lease term, guaranteed by the lessee Expected residual value of equipment at end of lease term Lease term Economic life of leased equipment Fair value of asset at January 1, Lessor's implicit rate Lessee's incremental borrowing rate January 1, $126,840 $55,000 $50,000 6 years 6 years $653,000 9 % 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.
On January 1, 2021, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing's lease amortization schedule appear below: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Jan. 1 2021 2021 2022 2023 2024 2025 2026 1. 2. WN 3. 4. 2038 2039 2040 2041 7 Payments 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 38,449 5. 6. Net investment Effective Decrease in Interest Balance 11,800 11,584 11,351 11,099 10,827 5,250 4,510 3,711 2,848 Lease term Asset's residual value Effective annual interest rate Lease payments for United Lease payments for NIC 7. 8. Right-of-use asset Required: 1. What is the lease term In years? 2. What is the asset's residual value expected at the end of the lease term?…
he following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Ivanhoe Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $99,118 Residual value of equipment at end of lease term, guaranteed by the lessee $53,000 Expected residual value of equipment at end of lease term $48,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $554,000 Lessor’s implicit rate 6 % Lessee’s incremental borrowing rate 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. (a) Your answer is partially correct. Try again. Prepare an amortization schedule that would be suitable for the lessee for the lease term.…
Determining Amounts in Operating Lease-Lessee Kulver's Inc. leases equipment from Equip Inc. on January 1 under a 3-year operating lease. Kulver's agrees to pay Equip Inc. $15,000 annually with the first payment due on January 1. As an incentive for Kulver's to sign the lease by January 1, Equip Inc. paid Kulver's Inc. $700. Kulver's also incurred legal fees for the review of the lease agreement ($200) and salaries for employees involved in negotiating the lease ($1,300). Assuming an incremental borrowing rate of 7% for Kulver's Inc., determine the value of the lease liability and the right-of- use asset on January 1 for Kulver's. Note: Round your answers to the nearest whole dollar. Lease liability $ 11,620 X Right-of-use asset $ 41,620✔ Check