Sunland Company leases equipment from Bridgeport Inc. for five years starting on January 1, 2025. The lease is properly classified as afinance/sales-type lease. The terms of the lease are as follows:a) Bridgeport will pay $2500 in legal fees to execute the lease.b) Bridgeport will incur $1500 of lease documentation costs after the execution of the lease.c)Sunland will pay commissions to the lease negotiator of $2500.d) Sunland must prepay the last month's rental payment of $12500.e) Sunland pays internal engineering costs of $6250 to identify any structural considerations when installing the equipment.f) The initial measurement of the liability for Sunland is $150000.What amount will be reported for Sunland's right-of-use asset at the commencement date?O $168750O $150000O $171250O $169000

To determine the amount reported for Sunland's right-of-use asset at the commencement date, we need…

Answered: Sunland Company leases equipment from…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

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.
Kingbird Company leases a building and land. The lease term is 7 years and the annual fixed payments are $720,000. The lease arrangement gives Kingbird the right to purchase the building and land for $13,000,000 at the end of the lease. Based on an economic analysis of the lease at the commencement date, Kingbird is reasonably certain that the fair value of the leased assets at the end of lease term will be much higher than $13,000,000. What are the total lease payments in this lease arrangement? Total lease payments :____________
Leewin Brokerage enters into a lease agreement with Bumble Motors to lease an automobile with a fair value of $78,000 under a 5-year lease on December 20, 2022. The lease commences on January 1, 2023, and Leewin will return the automobile to Bumble on December 31, 2027. The automobile has an estimated useful life of 7 years. Leewin made a lease payment of $10,700 on December 20, 2022. In addition, the lease agreement stipulates annual payments of $10,700, due on January 1 of 2023, 2024, 2025, 2026, and 2027. The implicit rate of the lease is 4% and is known by Leewin. There is no purchase option, no lease incentives, no residual value guarantees, and no transfer of ownership. Leewin incurs initial direct costs of $2000.Assuming that this is classified as an operating lease, how much interest expense is recorded in 2023? Group of answer choices $1554 $2140 $0 $1982
Brown Enterprises enter into a 4 year lease with ABC Leasing Company. The lease qualifies as an operating lease. The first lease payment of $100,000 was due on January 1, 2024, on the date the lease was executed and all subsequent lease payments due on December 31. The present value of the lease payments was $348,685 and Brown Enterprises correctly recorded the right of use asset and lease liability on January 1, 2024 for this amount. The implicit rate in the lease is 10%. On its 2024 income statement, when Brown Enterprises reports its lease expense for 2024, it will be made up of which of the following components? (Choose all that apply) DAROU amortization $75,132 8. Interest expense $12,829 OCROU amortization $87,171 OD. Interest expense $24,869 Quesdan 12 of 25
On January 1, 2021, Coronado Industries leased a building to Sandhill Co. for a ten-year term at an annual rental of $175000. At inception of the lease, Coronado received $701000 covering the first two years' rent of $350000 and a security deposit of $351000. This deposit will not be returned to Sandhill upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $701000 should be shown as a current and long-term liability, respectively, in Coronado's December 31, 2021 balance sheet? Current Liability Long-term Liability $350000 $175000 $175000 $350000 $0 $701000 $350000 $351000
Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 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 6%; Whispering’s incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering 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. Whispering uses the straight-line method of depreciation on similar owned equipment.
Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 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 6%; Whispering's incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering 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. Whispering uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables.
Drew Company leased equipment from Biggs Leasing on January 1, 2021. The lease term is for ten (10) years with equal annual rental payments of $8,000 at the beginning of each year. In addition, Drew has the option to purchase the equipment at the end of the lease term for $5,000. It is reasonably certain that Drew will exercise this purchase option. At the outset of the lease term the equipment has a useful ife of twelve (12) years and a fair value of $56,000. The implicit rate of the lease is not known to Drew Drew's incremental borrowing rate is 12% A. Calculate the amount that Drew should record for the right-of-use asset and the lease liability. (Round to the nearest dollar. To get partial credit, show your calculations.) B. Prepare the journal entries that Drew should make on January 1, 2021 to 1) record the lease and to 2) record the first lease payment For the togibi
Dream Company leased equipment for its nine-year economic life, agreeing to pay P500,000 at the start of the lease on December 31, 2019 and P500,000 annually on each December 31 for the next eight years. The present value on December 31, 2019 of the nine lease payments over the lease term using the rate implicit in the lease which Dream knows to be 10% was P3,165,000. The December 31, 2019 present value of the lease payments using Dream's incremental borrowing rate of 12% was P2,985,000. Dream made a timely second lease payment. What amount should Dream report as finance liability in its December 31, 2020 statement of financial position? 2,431,500 None 3,500,000 2,283,000
Ivie Company uses leases as a method of selling its products. In 2020, Ivie Company completed construction of a passenger ferry. On January 1, 2020, the ferry was leased on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Annual lease payments do not include executory costs. Other terms of the agreement are as follows: Original cost of the ferry P9,000,000 Lease payment payable in advance P2,000,000 Estimated residual value P1,000,000 Implicit interest rate 12% Date of first lease payment January 1, 2020 Lease term 10 years 4. What is the profit on sale for 2020? 5. What is the interest income for 2020?
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.

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS