Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: Lease payments: $2,819,901 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 6% semiannually. Fair value of the computers on January 1, 2024: $22 million. What is the interest revenue that Technoid would report for this lease in its income statement for the year ended December 31, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $0 $2,201,466 $ 1,150, 806 None of these answer choices is correct.

Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: Lease payments: $2,819,901 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 6% semiannually. Fair value of the computers on January 1, 2024: $22 million. What is the interest revenue that Technoid would report for this lease in its income statement for the year ended December 31, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $0 $2,201,466 $ 1,150, 806 None of these answer choices is correct.

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

edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2013. The lease terms, provisions, and related events are as follows: 11 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,00 to be made in advance at the beginning of eacy year. 2. The equipment costs $313,000. the equipment has an estimatd life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs. 4. The interest rate implicit in the leae is 14%. 5. The intial direct costs are insignificant and assumed to be zero. 6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Prepare journal entries for Edom for the years 2013 and 2014.
Please help me
Integrity Company uses leases as a means of selling equipment. On July 1, 2021, the company leased a machine to a lessee. The cost of the machine to Integrity was P784,500. Annual lease payments are P135,000 and are payable in advance for 12 years. The residual value of the machine at the end of the lease term is P100,000 which is not guaranteed by the lessee. The lessor’s implicit interest rate is 10%. (Round off the PV factor to four decimal places, then do not round off during the computation)How much is the Cost of Sales to be reported by Integrity in 2021?
On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $80,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 5%. Winn also paid a $100,000 advance payment at the beginning of the lease in addition to the first $80,000 lease payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.Required:Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn’s fiscal year is the calendar year.
On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at a cost of $1,643,565. The lease agreement specifies six annual payments of $350,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2025. The six-year lease term ending December 31, 2026 (a year after the final payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase on the basis of the increase in the Consumer Price Index for the year just ended. Thus, the first payment will be $350,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 140. Southern routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 11%. (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…
Callaway Golf Co. leases telecommunications equipment from Sandhill Company. Assume the following data for equipment leased from Sandhill Company. The lease term is 5 years and requires equal rental payments of $30,380 at the beginning of each year. The equipment has a fair value at the commencement of the lease of $147,000, an estimated useful life of 8 years, and a guaranteed residual value at the end of the lease of $15,190. Sandhill set the annual rental to earn a rate of return of 6%, and this fact is known to Callaway. The lease does not transfer title or contain a bargain purchase option, and is not a specialized asset. How should Callaway classify this lease? ✓ Finance lease Operaing lease Sales-type lease
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia- Atlantic to make semiannual lease payments of $486,146 over a 4-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 12.0%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.7 million. (EV of $1. PV of $1, EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) at June 30, 2018. 2. What pretax amounts related to the lease would Builders report in its balance sheet at December 31, 2018? 3. What pretax amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018? (For all requirements, enter your…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $468,683 over a five-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's Incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Incorporated at a cost of $3.8 million. 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. What amount related to the lease would IC report in its balance sheet on December 31, 2024 (Ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2024 (Ignore taxes)? Note: For all requirements, enter your answers in whole dollars and not in millions. Round the…
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $403,067 over a five-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 8%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $3.40 million. 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 present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2024 (ignore taxes)? 3. What amount related to the lease would…
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset’s useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Inc. at a cost of $3 million. (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. What pretax amount related to the lease would IC report in its balance sheet at December 31, 2021?2. What pretax amount related to the lease would IC report in its income statement for the year ended December 31, 2021?
On January 1, 2023, Precision Pumps leases nonspecialized pumping equipment to Mega Construction. The equipment is delivered on January 1. The lease term is 4 years with no renewal or purchase options, and title to the leased asset is retained by the lessor at the end of the lease term. The lease requires annual fixed rental payments of $8500 per year beginning on January 1, 2023, and then December 31 of each year starting on December 31, 2023. The fair value of the equipment is $40,430 and has a carrying amount on Precision's books of $27,492. The equipment has a remaining life of 8 years. The estimated residual value of the equipment is $14,700. The lessee does not guarantee the residual value, but Precision secured an unrelated third party to guarantee $14,700; collection of this guaranteed residual value and lease payments are reasonably certain. The rate implicit in the lease is 9%. There are no prepaid rentals, and neither party to the agreement pays initial direct costs.What is…
2. On August 31, 2018, Simmons Inc. leased warehouse equipment from Covington Corp. The lease agreement calls for Simmons to make semiannual lease payments of $50,000 over a 7-year lease term, payable at August 31 and February 28, with the first payment on August 31, 2018. Simmons' incremental borrowing rate is 11%, the same rate Covington used to calculate lease payment amounts. Covington purchased the warehouse equipment at a cost of $700,000 on August 31, 2018 with an expected useful life of 10 years and no salvage value. The fiscal year for both Simmons and Covington ends on December 31. Required: a. What are the present value of the lease payments on August 31, 2018? b. Starting on August 31, 2018 prepare all journal entries related to the lease that Simmons would have to make through December 31, 2020. c. Starting on August 31, 2018 prepare all journal entries related to the lease that Covington would have to make through December 31, 2020. d. What amounts related to the lease…