Sales-type lease Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment. Purchase option reasonably certain to be exercised before lease term If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable. To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

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Answer 1

Question

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

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Answer 2

Question

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

Expert Solution & Answer

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Answer 3

Question

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

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Answer 4

Question

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

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Answer 5

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

Answer 6

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

Answer 7

Chapter 15, Problem 15.10P

(1)

To determine

Sales-type lease

Finance lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Purchase option reasonably certain to be exercised before lease term

If the purchase option is reasonably certain to be exercised before lease term, the lease term ends for accounting purpose. The lease payments includes only periodic cash payments stated in the lease agreement that occur preceding to the date a BPO becomes exercisable.

To Calculate: the amount of selling profit that MS Company would recognize in this sales type lease.

Answer 8

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

Answer 9

(2)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

Answer 10

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

Answer 11

(3)

To determine

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

Answer 12

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

Answer 13

(4)

To determine

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

Answer 14

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

Answer 15

(5)

To determine

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 15 - Prob. 15.1Q Ch. 15 - Prob. 15.2Q Ch. 15 - Prob. 15.3Q Ch. 15 - A lessee should classify a lease transaction as a...Ch. 15 - Lukawitz Industries leased non-specialized...Ch. 15 - In accounting for a finance lease/sales-type...Ch. 15 - What is selling profit on a sales-type lease? How...Ch. 15 - At the beginning of an operating lease, the lessee...Ch. 15 - At the beginning of an operating lease, the lessor...Ch. 15 - In accounting for an operating lease, how are the...

Solution Summary: The author explains that sales-type leases are a parallel type of direct financing whereby the owner (lessor) purchases the equipment and receives the interest revenue over the period of lease.

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) on September 30, 2018.

To Prepare: amortization schedule for AG Company (Lessee) and MS Company (Lessor)

To Prepare: Appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on December 31, 2018.

To Prepare: the appropriate entries for AG Company (Lessee) and MS Company (Lessor) as on September 29, 2020 (Assuming purchase option was exercise on that date)

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Chapter 15 Solutions