Principles of Financial Accounting.
22nd Edition
ISBN: 9780077632892
Author: John J. Wild
Publisher: McGraw Hill
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Chapter 14, Problem 17QS
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Preparing Lessee Journal Entries: Short-term Lease Election
Gomez Inc. entered into a contract on January 1 to lease a vehicle for one year, with monthly payments of $1,950 due at the end of each month. The vehicle has a fair value of $90,000. The lease agreement does not contain an option for purchase or renewal. The lessor's implicit rate of return is 5%.
Gomez Inc. elects the short-term leasing option.
Required
a. Prepare the entry for the first monthly payment on January 31.
Date
Jan. 31 Lease Expense
Cash
To record lease payment
Account Name
Date
Jan. 1
Dr.
To record lease payment
1,950
0
b. Assume instead that monthly lease payments are due at the beginning of the month. Record the entry for the monthly payment on January 1.
Account Name
Dr.
Cr.
Cr.
0
0
1,950 ✓
0x
0 x
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You and a colleague are reviewing a prospective lease transaction for your employer, Ma and Pa Kettle's (MPK). Having heard of the
new lease accounting standard update, your CFO has assigned you the task of assessing the impact of the lease transactions on the
company's financial statements. The terms are these: At the beginning of its fiscal year, MPK would lease restaurant space from Wilson
Corporation under a 10-year lease agreement. The contract calls for annual lease payments of $25,000 each at the end of each year.
The building was acquired last week by Wilson at a cost of $300,000 and is expected to have a useful life of 25 years with no residual
value for calculating straight-line depreciation. Wilson seeks a 10% return on its lease investments. (EV of $1, PV of $1. EVA of $1. PVA
of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
What will be the effect of the lease on MPK's earnings for the first year, and on…
Chapter 14 Solutions
Principles of Financial Accounting.
Ch. 14 - A bond traded at 97 means that a. The bond pays...Ch. 14 - Prob. 2MCQCh. 14 - Prob. 3MCQCh. 14 - Prob. 4MCQCh. 14 - Prob. 5MCQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQ
Ch. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 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 - Bond financing Identify the following as either an...Ch. 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 - Bond features and terminology Enter the letter of...Ch. 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 - Prob. 7ECh. 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. 1APCh. 14 - Prob. 2APCh. 14 - Prob. 3APCh. 14 - Prob. 4APCh. 14 - Prob. 5APCh. 14 - Prob. 6APCh. 14 - Prob. 7APCh. 14 - Prob. 8APCh. 14 - Prob. 9APCh. 14 - Prob. 10APCh. 14 - Prob. 11APCh. 14 - Prob. 1BPCh. 14 - Prob. 2BPCh. 14 - Prob. 3BPCh. 14 - Prob. 4BPCh. 14 - Prob. 5BPCh. 14 - Prob. 6BPCh. 14 - Prob. 7BPCh. 14 - Prob. 8BPCh. 14 - Prob. 9BPCh. 14 - Prob. 10BPCh. 14 - Prob. 11BPCh. 14 - Prob. 14SPCh. 14 - Prob. 1BTNCh. 14 - Prob. 2BTNCh. 14 - Prob. 3BTNCh. 14 - Prob. 4BTNCh. 14 - Prob. 5BTNCh. 14 - Prob. 7BTNCh. 14 - Prob. 9BTN
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- You are deciding whether to buy a car for $18,500 or to accept a lease agreement. The lease entails a $1000 fee plus monthly payments of $230 for 48 months. Under the lease agreement, you are responsible for service on the car and insurance. At the end of the lease, you may purchase the car for $7000. Complete parts a through c below. a. Should the cost of service and insurance determine which option you choose? OA. Yes, because you probably don't have to pay for services when you buy the car. OB. Yes, because you get a discount on your insurance when you lease the car. OC. No, because it is cheaper to lease the car than to buy it. OD. No, because you will probably have to pay for service and insurance with either plan. b. Does the total cost of purchasing the car at the end of the lease agreement exceed the cost of purchasing the car at the outset? A. Yes, the total cost of the car at the end of the lease is $ OB. No, the total cost of the car at the end of the lease is $ c. What are…arrow_forwardPrepare all the journal entries for Scuppermong for Years 1 and 2.arrow_forwardplease ansert the following questions thanksarrow_forward
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