Sunland Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Coronado Airlines for a period of 10 years. The normal selling price of the equipment is $291,687, and its unguaranteed residual value at the end of the lease term is estimated to be $20,800. Coronado will pay annual payments of $43,500 at the beginning of each year. Sunland incurred costs of $164,300 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Coronado Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to 0 decimal places eg. 58,971) The amount of the initial lease liability $

Sunland Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Coronado Airlines for a period of 10 years. The normal selling price of the equipment is $291,687, and its unguaranteed residual value at the end of the lease term is estimated to be $20,800. Coronado will pay annual payments of $43,500 at the beginning of each year. Sunland incurred costs of $164,300 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Coronado Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to 0 decimal places eg. 58,971) The amount of the initial lease liability $

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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On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018. Only typing answer Please explain step by step
NutraLabs, Incorporated, leased a protein analyzer to Werner Chemical, Incorporated, on September 30, 2024. • NutraLabs manufactured the machine at a cost of $5 million. • The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. • NutraLabs' implicit interest rate is 12%. • The useful life of the equipment is five years. 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 $1) Required: 1. Determine the price at which NutraLabs is "selling" the equipment (present value of the lease payments) on September 30, 2024 2. What pretax amounts related to the lease would NutraLabs report in its balance sheet on December 31, 2024? 3. What pretax amounts related to the lease would NutraLabs report in its income statement for the year ended December 31, 2024? 4. What pretax amounts related…
On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. • The contract calls for four rent payments of $18,000 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $106,000 and were expected to have a useful life of five years with no residual value. . Both firms record amortization and depreciation semiannually. 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 $1) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your answers…
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required(Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing Company. c)…
Gilroy Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,140. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Gilroy can lease the equipment from a domestic supplier for $1,540 per year for four years, with no additional costs. Prepare a differential analysis dated December 11 to determine whether Gilroy should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease Machine (Alt. 1) or Buy Machine (Alt. 2) December 11 Lease Machine(Alternative 1) Buy Machine(Alternative 2) Differential Effecton Income(Alternative 2) Revenues $0 $0 $0 Costs:…
6... Cheyenne Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $276,779, and its unguaranteed residual value at the end of the lease term is estimated to be $18,400. National will pay annual payments of $39,900 at the beginning of each year. Cheyenne incurred costs of $189,300 in manufacturing the equipment and $3,700 in sales commissions in closing the lease. Cheyenne has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%. Prepare a 10-year lease amortization schedule for Cheyenne, the lessor. (Round answers to 0 decimal places e.g. 5,275.) CHEYENNE COMPANY (Lessor)Lease Amortization ScheduleAnnuity Due Basis, Unguaranteed Residual Value Beginningof Year Annual Lease PaymentPlus Residual Value Interest onLease Receivable Lease ReceivableRecovery…
American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 10%. (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.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Prepare the appropriate entries related to the lease…
Cullumber Inc manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $505,456. and its guaranteed residual value at the end of the non- cancelable lease termis estimated to be $16,400. The hospital will pay rents of $61,100 at the beginning of each year. Cullumber incurred costs of $227,000 in manufacturing the machine and $13400 in legal fees directly related to the signing of the lease. Cullumber has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Discuss the nature of this lease in relation to the lessor. The nature of this lease in relation to the lessor is Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to 0 decimai places, eg. 5,275.) (1) Lease receivable at commencement of the lease (2) Sales price…
On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. 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 $1) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your answers in the…
Bravo Manufacturing Company is negotiating with a customer for the lease of a large machine manufactured by Bravo. The machine has a cash price of $780,000. Bravo wants to be reimbursed for financing the machine at a 12% annual interest rate over the five-year lease term.
Marshall Inc. is negotiating an agreement to lease equipment to a lessee for 5 years. The equipment has a useful life of 8 years. The fair value of the equipment is $ 64,000 and the lessor expects a rate of return of 5% on the lease contract. Marshall Inc. expects the equipment to have a fair value of $24,000 at the end of 5 years; however, the lessee does not guarantee the residual amount. If the first annual payment is required at the commencement of the lease, what fixed lease payment should Marshall Inc. charge in order to earn its expected rate of return on the contract? Note: Enter the answer in dollars and cents, rounded to the nearest penny. Note: Do not use a negative sign with your answer.