WORKING PAPERS F/ FUND ACCOUNTING
22nd Edition
ISBN: 9781308868394
Author: Wild
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 14, Problem 11BPSB
Problem 14-11EC
Capital lease accounting
C3
Braun Company signs a ?ve-year capital lease with Verdi Company for office equipment. The annual year-end lease payment is $20,000, and the interest rate is 10%.
Required
1. Compute the present value of Braun’s lease payments.
2. Prepare the
3. Complete a lease payment schedule for the ?ve years of the lease with the following headings. Assume that the beginning balance of the lease liability (present value of lease payments) is $75,816. (Hint: To ?nd the amount allocated to interest in year 1, multiply the interest rate by the beginning-of year lease liability. The amount of the annual lease payment not allocated to interest is allocated to principal. Reduce the lease liability by the amount allocated to principal to update the lease liability at each year-end.)
4. Use straight-line
Check (1) $75,816
(3) Year 3 ending balance $34,712
| Period Ending Date | Beginning Balance of Lease Liability | Interest on Lease Liability | Reduction of Lease Liability | Cash Lease Payment | Ending Balance of Lease Liability |
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Journal entry worksheet
<
1
2
The company can sign a 23-month lease for the equipment by agreeing to pay
$8,652.79 at the end of each month, beginning January 31, 2024. At the end
of the lease, the equipment must be returned. Assuming a borrowing rate of
12%, record the lease.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
January 01, 2024
Lease Asset
Lease Payable
Problem 21-01
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Concord Company, a lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of each year, beginning with January 1,
$113,055
Residual value of equipment at end of lease term, guaranteed by the lessee
$54,000
Expected residual value of equipment at end of lease term
$49,000
Lease term
6
years
Economic life of leased equipment
6
years
Fair value of asset at January 1,
$585,000
Lessor’s implicit rate
9
%
Lessee’s incremental borrowing rate
9
%
The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5…
Denger
Chapter 14 Solutions
WORKING PAPERS F/ FUND ACCOUNTING
Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQ
Ch. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 15DQCh. 14 - Prob. 16DQCh. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - Prob. 20DQCh. 14 - Prob. 1QSCh. 14 - Prob. 2QSCh. 14 - Prob. 3QSCh. 14 - Prob. 4QSCh. 14 - Prob. 5QSCh. 14 - Prob. 6QSCh. 14 - Prob. 7QSCh. 14 - Prob. 8QSCh. 14 - Prob. 9QSCh. 14 - Prob. 10QSCh. 14 - Prob. 11QSCh. 14 - Prob. 12QSCh. 14 - Prob. 13QSCh. 14 - Prob. 14QSCh. 14 - Prob. 15QSCh. 14 - Prob. 16QSCh. 14 - Prob. 17QSCh. 14 - Prob. 18QSCh. 14 - Prob. 19QSCh. 14 - Prob. 20QSCh. 14 - Prob. 1ECh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4ECh. 14 - Prob. 5ECh. 14 - Prob. 6ECh. 14 - Exercise 14*7 Straight-Line: Amortization of bond...Ch. 14 - Prob. 8ECh. 14 - Prob. 9ECh. 14 - Prob. 10ECh. 14 - Prob. 11ECh. 14 - Prob. 12ECh. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Prob. 19ECh. 14 - Prob. 20ECh. 14 - Prob. 1APSACh. 14 - Prob. 2APSACh. 14 - Prob. 3APSACh. 14 - Prob. 4APSACh. 14 - Prob. 5APSACh. 14 - Prob. 6APSACh. 14 - Prob. 7APSACh. 14 - Prob. 8APSACh. 14 - Prob. 9APSACh. 14 - Prob. 10APSACh. 14 - Prob. 11APSACh. 14 - Prob. 1BPSBCh. 14 - Prob. 2BPSBCh. 14 - Prob. 3BPSBCh. 14 - Prob. 4BPSBCh. 14 - Prob. 5BPSBCh. 14 - Prob. 6BPSBCh. 14 - Prob. 7BPSBCh. 14 - Prob. 8BPSBCh. 14 - Prob. 9BPSBCh. 14 - Prob. 10BPSBCh. 14 - Problem 14-11EC Capital lease accounting C3 Braun...Ch. 14 - Prob. 14SPCh. 14 - Prob. 1BTNCh. 14 - Prob. 2BTNCh. 14 - Prob. 3BTNCh. 14 - Prob. 4BTNCh. 14 - Prob. 5BTNCh. 14 - Prob. 6BTNCh. 14 - Prob. 7BTNCh. 14 - Prob. 8BTNCh. 14 - Samsung (w ww.Sanisung.com). Apple, and Google are...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Exercise 21-8 The following facts pertain to a noncancelable lease agreement between Bridgeport Leasing Company and Indigo Company, a lessee. Inception date: May 1, 2017 Annual lease payment due at the beginning of each year, beginning with May 1, 2017 $20,253.44 Bargain-purchase option price at end of lease term $4,100 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $64,000 Fair value of asset at May 1, 2017 $87,000 Lessor’s implicit rate 10 % Lessee’s incremental borrowing rate 10 % The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0). Click here to view factor tables Prepare a lease amortization schedule for Indigo Company for the 5-year lease term.arrow_forwardChapter 15 Homework Seved On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to ean NRC a 12% rate of return for providing long-term financing. The lease agreement specified the following: a. Ten annual payments of $55,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $316,412. c The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2021. NRC was to pay this cost as incurred, but lease payments refiect this expenditure. e. A partial amortization schedule, appropriate for both the lessee'and lessor, follows: Wnces (EV of $1. PV.of $1 EVA of $1. PVA of $1. EVAD of…arrow_forwardProblem 5. Operating Lease- Lessor On January 1, 2 0x1, Lessor entered into operating lease. an Information followS: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to Cover for costs of administrative tasks is to be paid for any excess of sales of Lessee over P1,000,000. Lessee's sales for 20x1 are P1, 100, 000. Additional rent of 10% The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual depreciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.arrow_forward
- Problem 4 On January 1, 2021, Twice Company entered into a lease agreement with the following: Floor space Annual rental payable at the end of each year Implicit rate in the lease 1,500 square meters 200,000 12% 12 years 6.1944 Lease term Present value of an ordinary annuity at 12% for 12 periods On January 1, 2024, the lessee and the lessor agreed to amend the original terms of the lease with the following information: Additional floor space Increase in rental payable at the end of each year Implicit rate in lease Present value of an ordinary annuity of 1 at 10% for 9 periods 2,000 square meters 300,000 10% 5.759 1. What amount should be reported as lease liability on January 1, 20217 2. What amount should be reported as additional lease liability on January 1, 2024? 3. What amount should be reported as total interest expense for 20247arrow_forwardProblem C- Garol Gym On January 1, 2016. Garol Gym leased equipment under a finance lease. The lease agreement specified payments of P37.000 per year (payable each year on December 31. starting at the end of 2016) for 8 years. The market rate of interest for lease transactions of this type is 8 percent compounded annually Required a. Calculate the present value of the lease. b. Journalize the lease arrangement on Garol's blook on January 1, 2016. b. Prepare an amortization schedule of all the lease payments. obokarrow_forwardQuestion Content Area A six-year operating lease requires annual rent payments of $15,000 for years 1, 2, and 3, and annual rent payments of $10,000 for years 4, 5, and 6. The agreement also requires the lessor to pay a $2,800 annual insurance premium for the leased property. Which of the following amounts should be recognized as the rental revenue in year 1 by the lessor? $10,000 $16,800 $15,000 $13,500arrow_forward
- 7arrow_forwardProblem 11-5 On January 1,2020, Madelle Company entered into a lease for floor space with the following information. Floor space 5,000 square meters Annual rental payable at the end of each year 200,000 Lease term 5 years Implicit in the elase 10% Present value of an ordinary annuity of 1 for 10% at 5 periods 3.7908 On Jnaury 1, 2022, Madelle Company and the lessor agreed to amend the original terms of the lease with the following information. Floor space 3,750 square meters Annual rental payable at the end of each year 150,000 Implicit in the elase…arrow_forwardPROBLEM 3C Assume that ADB Leasing Corp. and WXY Inc. sign a lease contract effective on January 1, 2019where ADB Leasing leases to WXY Inc. a bulldozer. The terms and provisions of the lease contract andother pertinent date are as follows:• The term of the lease is five years. The lease agreement is non-cancelable, requiring equal rentalpayments of P20,711.11 at the beginning of each year (annuity-due basis).• The bulldozer has a fair value at the commencement of the lease of P100,000, an estimatedeconomic life of five years, and a guaranteed residual value of P5,000. (WXY expects thatit is probable that the expected value of the residual value at the end of the lease will be greaterthan the guaranteed amount of P5,000.)• The lease contains no renewal options. The bulldozer reverts to ADB Leasing at the terminationof the lease.• WXY's incremental borrowing rate is 5 percent per year.• WXY depreciates its equipment on a straight-line basis.• ADB Leasing sets the annual rental rate to…arrow_forward
- accarrow_forwardProblem 5. Operating Lease- Lessor On January 1, 20x1, Lessor entered into an operating lease. Information follows: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to cover for Costs of administrative tasks Additional rent of 10% is to be paid for any excess of sales of Lessee over P1,000, 000. Lessee's sales for 20x1 are P1, 100, 000. The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual de preciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.arrow_forwardQuestion 2: Figy Co entered into a 4-year lease agreement on 1 January 20X5. The agreement meets the definition of a lease in accordance with IFRS 16. An initial payment of $150,000 was made on 1 January 20X5 followed by three annual payments on 1 January of $110,000 each. The rate implicit in the lease is 10%. Figy Co incurred initial direct costs of X2 to set up the lease. Required: 1. Give your own X2 then calculate the cost of the right-of-use asset as at 1 January 20X5? 2. What is the carrying amount of the lease liability at 31 December 20X6? 3. What amount will be charged to the statement of profit or loss in respect of this asset for the year ended at 31 December 20X6? 4. Prepare necessary accounting entries related to this lease agreement for the year ended at 31 December 20X5.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781285867977Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License