Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 11, Problem 29P
a.
To determine
Determine the appropriate accounting for this sale and leaseback for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.
b.
To determine
Prepare the entry that Company R would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.
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Thornhill Equipment (lessor) leased a construction crane to Vanier Construction (lessee) on January 1, 2023. The following information relates to the leased asset and the lease agreement.
(Click the icon to view the data.)
Both companies use the straight-line depreciation method for cranes, and they both have December 31 year-end dates.
Required
Requirement a. Evaluate how the lessor (Thornhill Equipment) should account for the lease transaction.
Start by determining the present value of the lease payments (PVLP). Then calculate the percentage of the PVLP compared to the fair value of the leased asset. (Use a financial calculator for all
present value computations. Enter all currency values as positive amounts rounded to the nearest whole dollar. Round the percentage to the nearest whole percent.)
PVLP
Fair value of asset
PVLP as % of fair value
%
Leased asset and lease agreement
-
Cost of crane to lessor
100,000
Thornhill's normal selling price for crane
$
146,913
Useful life…
Assume that on December 31, 2018, Stora Enso (FIN) signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage. The following information pertains to this lease agreement.
1. The agreement requires equal rental payments of €71,830 beginning on December 31, 2018. 2. The fair value of the building on December 31, 2018, is €525,176. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of €10,000, and an expected residual value of €7,000. Stora Enso depreciates similar buildings using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the building reverts to the lessor.5. Stora Enso's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Stora Enso.
1. Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2018, 2019, and 2020.…
On January 1, 2020, Perriman Company transferred equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years.
Instructions
a. What is the major issue related to sale-leaseback accounting?
b.
1. How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2020?
2. How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2020?
Chapter 11 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
Ch. 11 - Historically, what factors contributed to the...Ch. 11 - Nestl S.A. is a very large company headquartered...Ch. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - In general terms, how does IFRS for SMEs differ...Ch. 11 - Prob. 7QCh. 11 - What are three countries that do not allow...Ch. 11 - Prob. 9QCh. 11 - Prob. 10Q
Ch. 11 - Prob. 11QCh. 11 - What are the two extreme approaches that a company...Ch. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 18QCh. 11 - Prob. 19QCh. 11 - Even if all companies in the world were to use...Ch. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Which of the following is not a reason for...Ch. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Which of the following statements is true for a...Ch. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Parnell Company acquired construction equipment on...Ch. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Hirsch Company acquired equipment at the beginning...
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