Capital Lease: A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied: -When the lease agreement is for at least 75% of economic life of assets. -When the accumulated lease rentals accounts for 90% of market value of assets. The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee. Requirement1: To Determine: ThePresent values of lease rentals paid for five years.

Question

Want to see the full answer?

Answer 1

Question

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Summary information from the financial statements of two companies competing in the same industry follows. Barco Company Kyan Company Barco Kyan Company Company Data from the current year-end balance sheets Data from the current year's income statement Assets $ 810,000 $ 886,200 Cash $ 18,500 $ 32,000 Accounts receivable, net 36,400 84,340 590,100 7,600 644,500 Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Total liabilities and equity 6,100 330,000 52,400 132,500 7,600 305,400 $ 475,340 $ 529,900 Sales Cost of goods sold Interest expense Income tax expense Net income Basic earnings per share Cash dividends per share Beginning-of-year balance sheet data Accounts receivable, net Merchandise inventory Total assets $ 71,340 82,800 $ 98,300 117,000 170,000 151,200 226,000 88,600 Common stock, $5 par value $ 475,340 $ 529,900 Retained earnings 14,000 15,569…

Question: Record the purchase of equipment in a general journal format. • July 1, 2021- Signed a lease for an office and issued Check 101 for $15,600 to pay the rent in advance for six months. • July 1, 2021- Borrowed money from Bancorp West by issuing a four-month, 4.5 percent note for $40,000; received $39,400 because the bank deducted the interest in advance. • July 1, 2021- Signed an agreement with Johnson Ventures to provide financial services for one year at $6,000 per month; received the entire fee of $72,000 in advance. The $72,000 was credited to Unearned Financial Service Fees. • July 1, 2021- Purchased office equipment for $15,900 from Office Outfitters; issued a two-month, 6 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,500 salvage value. The equipment will be depreciated using the straight-line method. • July 1, 2021- Purchased a one-year insurance policy and issued Check 102 for $1,860 to pay the entire…

Question: Record the fees received in advance in a general journal format. • July 1, 2021- Signed a lease for an office and issued Check 101 for $15,600 to pay the rent in advance for six months. • July 1, 2021- Borrowed money from Bancorp West by issuing a four-month, 4.5 percent note for $40,000; received $39,400 because the bank deducted the interest in advance. • July 1, 2021- Signed an agreement with Johnson Ventures to provide financial services for one year at $6,000 per month; received the entire fee of $72,000 in advance. The $72,000 was credited to Unearned Financial Service Fees. • July 1, 2021- Purchased office equipment for $15,900 from Office Outfitters; issued a two-month, 6 percent note in payment. The equipment is estimated to have a useful life of five years and a $1,500 salvage value. The equipment will be depreciated using the straight-line method. • July 1, 2021- Purchased a one-year insurance policy and issued Check 102 for $1,860 to pay the…

Answer 2

Question

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Answer 6

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

Answer 7

Chapter 14, Problem 11APSA

To determine

Capital Lease:

A lease agreement is an agreement where the owner of assets (referred as lessor) agreed to provide the owned assets to another person (referred as lessee) on regular rental payments (referred as lease payment). The lease is termed as Capital lease when the following conditions are satisfied:

-When the lease agreement is for at least 75% of economic life of assets.

-When the accumulated lease rentals accounts for 90% of market value of assets.

The lease which has been termed as Capital lease, the lessee will show the leased asset as his own asset and lease rentals as its liability as is the lessee has purchased the assets with borrowed funds. As and when the lease rentals are paid, it will be divided as interest and principal repayment just as repayment of borrowed funds. Also, as the lessee is allowed to show the assets in his books therefore, the benefit of depreciation expense is also available to the lessee.

Requirement1:

To Determine: ThePresent values of lease rentals paid for five years.

Answer 8

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

Answer 9

To determine

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

Answer 10

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

Answer 11

To determine

Requirement3:

To Determine: The lease payment schedule shall be prepared.

Answer 12

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Answer 13

To determine

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

Ch. 14 - Prob. 1DQ Ch. 14 - Prob. 2DQ Ch. 14 - Prob. 3DQ Ch. 14 - Prob. 4DQ Ch. 14 - Prob. 5DQ Ch. 14 - Prob. 6DQ Ch. 14 - Prob. 7DQ Ch. 14 - Prob. 8DQ Ch. 14 - Prob. 9DQ Ch. 14 - Prob. 10DQ

Concept explainers

Videos

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

Requirement3:

To Determine: The lease payment schedule shall be prepared.

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.

Want to see the full answer?

Chapter 14 Solutions

Concept explainers

Videos

Requirement 2: To determine: Journal entry for recording the inception of capital lease.

Requirement3: To Determine: The lease payment schedule shall be prepared.

Requirement4: To Determine: The Journal entry required for the depreciation of leased asset.

Want to see the full answer?

Chapter 14 Solutions

Requirement 2:

To determine: Journal entry for recording the inception of capital lease.

Requirement3:

To Determine: The lease payment schedule shall be prepared.

Requirement4:

To Determine: The Journal entry required for the depreciation of leased asset.