9th Edition

ISBN: 9781259722660

Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher: McGraw-Hill Education

Concept explainers

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Textbook Question

Chapter 15, Problem 15.30P

Sales-type lease; lessor; financial statement effects

• LO15–3, LO15–8

NutraLabs, Inc. leased a protein analyzer to Werner Chemical, Inc. on September 30, 2018. NutraLabs manufactured the machine at a cost of $5 million. The five-year lease agreement calls for Werner to make quarterly lease payments of $391,548, payable each September 30, December 31, March 31, June 30, with the first payment at September 30, 2018. NutraLabs’ implicit interest rate is 12%.

Required:

1. Determine the price at which NutraLabs is “selling” the equipment (present value of the lease payments) at September 30, 2018 (to the nearest $000).
2. What pretax amounts related to the lease would NutraLabs report in its balance sheet at December 31, 2018?
3. What pretax amounts related to the lease would NutraLabs report in its income statement for the year ended December 31, 2018?
4. What pretax amounts related to the lease would NutraLabs report in its statement of cash flows for the year ended December 31, 2018?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 15, Problem 15.29P

Chapter 15, Problem 15.31P

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Chapter 15 Solutions

Intermediate Accounting

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...

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