The equipment reverts back to the lessor at the end of the lease term. How much is interest expense on the lease for the first year? Select one: a. $5,472 b. $2,736 c. $5,322 d. $1,331
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The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1:
- Fair value of equipment at lease inception, $91,200
- Lease term, 4 years
- Economic life of property, 5 years
- Implicit interest rate, 6%
- Annual lease payment due on December 31, $25,600
- Present value of the lease payments, $88,707
The equipment reverts back to the lessor at the end of the lease term.
How much is interest expense on the lease for the first year?![](/static/compass_v2/shared-icons/check-mark.png)
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- Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement: 1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option. 2. The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year. 3. The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19. 4. The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time. Required: Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease. there are 6 entriesThe 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…c) The information below relates to a leasing arrangement between Frankfield Leasing Company and Boswell Manufacturing Company, a lessee. Inception date Lease term (non cancellable) January 1, 2020 5 years Annual lease payment due at the beginning of each $28,500 year beginning January 1, 2020 Fair value of asset at January 1, 2020 Economic life of leased equipment $130,000 6 years Residual value of equipment at end of lease $25,270 term, unguaranteed by the lessee Lessor's implicit rate (not known by the lessee) 6% Lessee's incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. There is an expected residual value of $25,270 which is unguaranteed by the lessee. The lessee uses the straight-line depreciation method for all equipment. (Round all figures to the nearest $1.)
- A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $235,000. (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: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization table through the second payment on January 1, 2017. c. What would be the increase in earnings that the lessor would report in its income statement for the year ended December 31, 2016 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required A Required B Required C What would be the increase in earnings that the lessor would report in its…Terms of a lease agreement and related facts were: a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction incurred by the lessor were $5,408. b. The retail cash selling price of the leased asset was $425,000. Its useful life was three years with no residual value. c. The lease term is three years and the lessor paid $425,000 to acquire the asset. d. Annual lease payments at the beginning of each year were $160,000. e. Lessor's implicit rate when calculating annual rental payments was 13%. (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 appropriate entries for the lessor to record the lease and related payments at its beginning, January 1, 2018. 2. Calculate the effective rate of interest revenue after adjusting the net investment by initial direct costs. 3. Record any entry(s) necessary at December 31, 2018, the fiscal year-end.…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, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Bensen set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Instructions (Both the lessor and the lessee's accounting periods end on December 31.) a. Discuss the nature of this lease to Bensen and Flynn. b.…At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?A lease agreement calls for annual payments of $56,979 over a 6-year period (also the asset's useful life). The lease is signed January 1, 20X1 with the first payment due on that date. The interest rate is 8%, and the PV of lease payments is $284,480. The lessor manufactured the asset at a cost of $270,000. 24. In year 20X1, the lease decreases the lessee's net income by 25. In year 20X1, the lease increases the lessor's net income by,
- Core Co. leased a piece of manufacturing equipment from E-So Co. with the following terms: Annual lease payment: $990,000 Term of lease: 5 years Interest rate: 4% Lease commences on January 1, 2023 Payments are made on December 31 of each year in the lease term For parts a and b: a. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as a finance lease. b. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as an operating lease. Operating Lease Finance Lease a. Finance lease: Date Jan. 1, 2023 Account To record the start of the finance lease. Dec. 31, 2023 To record the amortization of leased asset. Dec. 31, 2023 Dec. 31, 2024 Dec. 31, 2024 To record the lease payment. To record the amortization of leased asset. To record the lease payment. > > > > > > > > > > Debit Credit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0The 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.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.…
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