Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-yearperiod and requires equal annual payments of $32,055 at the beginning of each year. The first payment is received on January 1, 2025.Wildhorse had purchased the machine during 2024 for $129,000. Collectibility of lease payments by Wildhorse is probable.Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value andreverts to Wildhorse at the termination of the lease.Click here to view factor tables.(a)* Your answer is incorrect.Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table providedand round final answer to O decimal places e.g. 5,275.)Amount of the lease receivable256440

The amount of the lease receivable for Wild horse Company is calculated as follows:Determine the…

Answered: Wildhorse Company, a machinery dealer,…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 27E

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
Cullumber Company, a machinery dealer, leased a machine to Ivanhoe Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $29,169 at the beginning of each year. The first payment is received on January 1, 2025. Cullumber had purchased the machine during 2024 for $109,000. Collectibility of lease payments by Cullumber is probable. Cullumber set the annual rental to ensure a 636 rate of return. The machine has an economic life of 10 years with no residual value and reverts to Cullumber at the termination of the lease. Click here to view factor tables. (a) Your answer is correct. Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places eg. 5,275.) Amount of the lease receivable $ (b) eTextbook and Media List of Accounts Date 192,001 Prepare all necessary journal entries for Cullumber for 2025. (List all debit entries…
Cullumber Company, a machinery dealer, leased a machine to Ivanhoe Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $30,840 at the beginning of each year. The first payment is received on January 1, 2025. Cullumber had purchased the machine during 2024 for $103,000. Collectibility of lease payments by Cullumber is probable. Cullumber set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Cullumber at the termination of the lease. Suppose the collectibility of the lease payments was not probable for Cullumber. Prepare the necessary journal entry for the company in 2025. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation 1/1/25 (d) * Your…
Sandhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on January 1, 2025. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable. Sandhill set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sandhill at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (for calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable eTextbook and Media List of Accounts
Sheldon Cooper Inc., an equipment dealer, leased a machine to Duffy Co. on January 1, 2022. The lease is for an 8-year period and requires equal annual payments of $29,300 at the beginning of each year. The first payment is received on January 1, 2022. Sheldon Cooper Inc. had purchased the machine during 2021 for $150,000. Collectibility of lease payments by Sheldon Cooper Inc. is probable. Sheldon Cooper Inc. set the annual rental to ensure a 4% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheldon Cooper Inc. at the termination of the lease. Assume that Duffy Co. does not know the rate implicit in the lease used by Sheldon Cooper Inc., and Duffy’s incremental borrowing rate is 6%. In addition, assume that Duffy incurs initial direct costs of $11,000. Compute the amount of the lease liability for Duffy. Present value of an annuity due of 1 for 8 periods at 6% is 6.58238. Present value of an ordinary annuity of 1 for 8 periods at 6%…
Sheridan Company, a machinery dealer, leased a machine to Sunland Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2025. Sheridan had purchased the machine during 2024 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $
Ivanhoe Company, a machinery dealer, leased a machine to Oriole Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $31,300 at the beginning of each year. The first payment is received on January 1, 2025. Ivanhoe had purchased the machine during 2024 for $170,000. Collectibility of lease payments by Ivanhoe is probable. Ivanhoe set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Ivanhoe at the termination of the lease. Assume that Oriole Corporation does not know the rate implicit in the lease used by Ivanhoe, and Oriole's incremental borrowing rate is 9%. In addition, assume that Oriole incurs initial direct costs of $13,000. Click here to view factor tables. (a) Compute the amount of the lease liability and right-of-use asset for Oriole. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers…
Blossom Company, a machinery dealer, leased a machine to Crane Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $22,300 at the beginning of each year. The first payment is received on January 1, 2025. Blossom had purchased the machine during 2024 for $140,000. Collectibility of lease payments by Blossom is probable. Blossom set the annual rental to ensure a 4% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Blossom at the termination of the lease. Assume that Crane Corporation does not know the rate implicit in the lease used by Blossom, and Crane's incremental borrowing rate is 6%. In addition, assume that Crane incurs initial direct costs of $10,000. Click here to view factor tables. (a) x Your answer is incorrect. Compute the amount of the lease liability and right-of-use asset for Crane. (For calculation purposes, use 5 decimal places as displayed in the factor table provided…
Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,384 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine during 2019 for $130,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. (a.) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $ (b.) Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal…
Sunland Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $29,928 at the beginning of each year. The first payment is received on January 1, 2020. Sunland had purchased the machine during 2019 for $150,000. Collectibility of lease payments by Sunland is probable. Sunland set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sunland at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable $

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