Lease Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’. Purchase option Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price. Sales-type lease Sales type 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. To show: the calculation of annual lease payment of $200,000 of the A Industries.

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Answer 1

Question

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

2)

To determine

the appropriate classification of lease by lessee and state the reason.

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

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Answer 2

Question

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

2)

To determine

the appropriate classification of lease by lessee and state the reason.

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Expert Solution & Answer

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Answer 3

Question

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

2)

To determine

the appropriate classification of lease by lessee and state the reason.

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Expert Solution & Answer

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Answer 4

Question

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

2)

To determine

the appropriate classification of lease by lessee and state the reason.

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Expert Solution & Answer

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Answer 5

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

2)

To determine

the appropriate classification of lease by lessee and state the reason.

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Answer 6

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

Answer 7

Chapter 15, Problem 15.11P

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Purchase option

Purchase option is provision of certain lease contracts which provides the lessee the option to purchase the leased asset during the period of lease or at the end of the lease term at a particular exercise price.

Sales-type lease

Sales type 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.

To show: the calculation of annual lease payment of $200,000 of the A Industries.

Answer 8

2)

To determine

the appropriate classification of lease by lessee and state the reason.

Answer 9

2)

To determine

the appropriate classification of lease by lessee and state the reason.

Answer 10

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

Answer 11

3)

To determine

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

Answer 12

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

Answer 13

4)

To determine

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

Answer 14

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Answer 15

5)

To determine

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

Answer 16

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Answer 17

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Answer 18

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Answer 19

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the appropriate classification of lease by lessee and state the reason.

To Prepare: the journal entries in the books of both Corporation PC (Lessee) and A Industries (Lessor) on December 31, 2016.

To Prepare: an amortization schedule describing the pattern of interest over the lease term for the lessee and lessor.

To prepare: The appropriate entries for both Corporation PC and Industries A on December 31, 2017, 2018 and 2019.

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Chapter 15 Solutions