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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rich Company uses lease as a means of selling its equipment. On July 1,2019, the company leased an equipment to Poor Company. The cost of the equipment to Rich Company was P 684,000. The fair market value ( which was the sales price) was P 792,236.54 at the time of the inception of the lease. Annual lease payments are P 135,000 and are payable in advance for 8 years. The equipment has an expected economic life of 10 years. At the end of the lease term , title to the equipment will pass to Poor Company. Implicit interest rate is 10%. What is the rich Company's total financial revenue pertaining to the lease?
Berne Company (lessor) enters into a lease with Fox Company to lease equipment to Fox beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of $50,000 to be made at the end of each year. The equipment costs $130,000. The equipment has an estimated life of 4 years and an estimated residual value at the end of the lease term of zero. Fox agrees to pay all executory costs directly to a third party. 4. The interest rate implicit in the lease is 12%. 5. The initial direct costs are insignificant and assumed to be zero. 6. The collectability of the rentals is reasonably assured. Required: 2. 3. 1. Next Level Assuming that the lease is a sales-type lease from Berne's point of view, calculate the selling price and assume that this is also the fair value. 2. Prepare a table summarizing the lease receipts and interest income earned by Berne. 3. Prepare journal entries…
Charlotte Corp., a machinery dealer, leased a machine to Eleanor Corp. on January 1, 2022. The lease is for an 8-year period, is noncancelable and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2022. Charlotte had purchased the machine during 2021 for $160,000. The FMV of the machine is 200,000. The present value of the minimum lease payments is also $200,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Charlotte. Charlotte set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Charlotte at the termination of the lease. Required: What type of lease is this for Charlotte (lessor) and why Prepare all of Charlotte’s journal entries for 2022.
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…
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. The lease agreement specified annual payments of $31,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $40,000 when its fair value was expected to be $55,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 11%. 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. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…
Metlock Corporation manufactures drones. On December 31, 2019, it leased to Althaus Company a drone that had cost $102,700 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires 5 equal annual rentals of $41,200 payable each December 31, beginning December 31, 2019. An interest rate of 10% is implicit in the lease agreement. Collectibility of the rentals is probable.Prepare Metlock’s December 31, 2019, journal entries.
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
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 $78,000 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 $285,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $363,000. 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollars.) 1. Record the…
Sheridan Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Coronado Limited a replicator that cost $265,800 to manufacture and usually sells for $417,000. The lease agreement covers the replicator's 4-year useful life and requires four equal annual rentals of $107.924 each, beginning May 29, 2020. The equipment reverts to Sheridan at the end of the lease, at which time it is expected that the replicator will have a residual value of $42,100, which is not guaranteed by Coronado, the lessee. An interest rate of 8% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Prepare Sheridan's May 29, 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is…
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. . The lease agreement specified annual payments of $34,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. . The company had the option to purchase the machine on December 30, 2026, for $43,000 when its fair value was expected to be $58,000, a sufficient difference that exercise seems reasonably certain. . The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12%. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease llability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare…
Marin Corporation manufactures drones. On December 31, 2019, it leased to Althaus Company a drone that had cost $118,900 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires 5 equal annual rentals of $41,800 payable each December 31, beginning December 31, 2019. An interest rate of 9% is implicit in the lease agreement. Collectibility of the rentals is probable.Prepare Marin’s December 31, 2019, journal entries.
On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $2,218,982. The lease agreement specifies six annual payments of $480,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year and (b) 3 percent. The CPI at the beginning of the lease is 150. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2018.

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