Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-yearuseful life and no residual value. The lease was signed on January 1, 2025. Macinski expects to earn an 8% return on its investment,and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2025.Click here to view factor tables.(b)(c)(d)Prepare the journal entry at commencement of the lease for Sharrer. (List debit entry before credit entry. Credit account titles areautomatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles andenter O for the amounts.)Date Account Titles and Explanation1/1/25eTextbook and MediaDebitCredit

An agreement of contract that is prepared to transfer the right to use the resources for a…

Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2025. Click here to view factor tables.

Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2025. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2025. Click here to view factor tables.

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

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…
STL enters into a 5-year lease of an item of plant on January 1, 2022. The annual rentals are P11.5 million, with the first installment paid on December 31, 2022. The present value of minimum lease payments are 50 million and the interest rate implicit in the lease is 5% per annum. Calculate the liability to be recognized in the Statement of Financial Position at December 31, 2023.
Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019. Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000. The interest rate implicit in the lease is 9%. The PV of an ordinary annuity of 1 for nine years at 9% is 5.60. 1. What amount should be reported as lease liability on December 31,2020? a. ₱ 4,500,000 b. ₱ 2,912,000 c. ₱ 4,680,000 d. ₱ 2,800,000 2. What is the initial recognition of the right of use asset? a. ₱ 3,112,000 b. ₱ 2,800,000 c. ₱ 3,000,000 d. ₱ 4,700,000 3. What is the carrying value of the right of use asset on December 31, 2021? a. ₱ 2,520,000 b. ₱ 2,488,889 c. ₱ 2,750,000 d. ₱ 2,666,667
On January 1,2024, Lowe's Inc. entered into a lease agreement with Traveler Inc. to lease a car for 3 years. The lease is accounted for as a finance lease and $5,000 in lease payments are due at at the beginning of the period starting January 1, 2024 and on December 31 of each year thereafter. There is no residual value. The rate implicit in the lease is 8%. On December 31, 2024, what entry (or entries) will Lowe's record regarding the lease? The present value of an annuity due at 8% for 3 years is 2.78326. (Round to whole dollars) OA. OB. OIC. O D. Lease expense Lease liability Right of use asset Interest expense Lease liability Cash Amortization expense Right-of-use asset Interest expense Lease liability Amortization expense Right-of-use asset Interest expense Lease liability Cash Debit 5,000 Debit 713 4,287 4,639 Debit 713 4,295 Debit 713 4,287 Credit 1031 3,969 Credit 5,000 4,639 Credit 713 4,295 Credit 5,000 A
On January 1, 2020, Sheridan Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. 2. 3. 4. 5. 6. 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 $2,000, while the expected residual value at the end of the lease is $9,000. Equal rental payments are due on January 1 of each year, beginning in 2020. The fair value of the equipment on January 1, 2020, is $145,000, and its cost is $130,000. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. Sheridan set the annual rental to ensure a 6% rate of return. Flynn's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31. Date Account Titles and Explanation (To record the lease) (To record lease payment)…
On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Oriole agreed to make annual lease payments of $18,500, beginning on December 31, 2019. The expected residual value of the machinery at the end of the lease term is $9,250. Oriole guarantees a residual value of $9,250 at the end of the lease term, which equals the expected residual value of the machinery. What amount will Oriole record as its lease liability if the expected residual value at the end of the lease term is $6,250 and Oriole guarantees a residual of $9,250. Its incremental borrowing rate is 6% and the implicit rate of the lease is unknown? Lease liability = $________ please explain how
Ball Company leased machinery to Denver Company on July 1, 2021, for a ten-year period expiring June 30, 2031. Equal annual payments under the lease are $250,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest used by Harter and Stine is 9%. The lease receivable before the first payment is $1,750,000 and the cost of the machinery on Ball’s accounting records was $1,550,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Ball, what amount of interest revenue would Ball record for the year ended December 31, 2021? a. $67,500 b. $135,000 c. $157,500 d. $0
Rahul
On January 1, 2022, ABC Company signed a 5-year non-cancelable lease for a building. This is also the period when the contract is enforceable.The terms of the lease called the ABC to make annual payments of P500,000 at the beginning of each year starting January 1, 2022. The contract provides that ABC will obtain the ownership at the end of the lease term. The building has an estimated useful life of 6 years and a P120,000 guaranteed residual value at the end of the five-year lease term. ABC has a constructive obligation to restore the machine to a condition still suitable for use at the end of the lease term. Estimated cost of restoration is P200,000. ABC incurred directly attributable cost of P90,000 to install the machine. The rate implicit in this contract is not readily determinable at the time of inception of the contract and incremental borrowing rate is at 9%. How much depreciation expense will be taken up by ABC?
On June 1, 2021, Florida National leased a building. The lease agreement calls for Florida National to make lease payments of $3,618.18 each month for the next two years, with the first lease payment beginning June 30. The company’s normal borrowing rate is 8%.Required:1. Calculate the present value of the lease payments. Round to the nearest whole dollar. (Hint: Use a financial calculator or Excel)2. Record the lease on June 1, 2021.
On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000
On January 1, 2019, Ashly Farms leased a hay baler from Agrico Company. The lease requires Ashly to make $3,000 payments on January 1 of each year for 5 years beginning in 2019. The interest rate is 12%. Calculate the present value of Ashly's lease payments as of January 1, 2019.