CONNECT ONLINE ACCESS FOR INTERMEDIATE
10th Edition
ISBN: 9781264798834
Author: SPICELAND
Publisher: MCG
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Chapter 15, Problem 15.8BE
Operating lease
• LO15–4
(Note: Brief Exercises 8 and 9 are two variations of the same basic situation.)
At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a seven-year operating lease agreement. The contract calls for quarterly rent payments of $25,000 each. The office building was acquired by Lakeside at a cost of $2 million and was expected to have a useful life of 25 years with no residual value. What will be the effect of the lease on LTT’s earnings for the first year (ignore taxes)?
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Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4]
On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-
year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest
rate of 4%.
. The contract calls for four rent payments of $20,000 each, payable semiannually on June 30 and December 31 each year.
• The computers were acquired by ComputerWorld at a cost of $110,000 and were expected to have a useful life of eight years
with no residual value.
. Both firms record amortization and depreciation semiannually.
Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Required:
1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease.
2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first…
Please answer
Sh16
Chapter 15 Solutions
CONNECT ONLINE ACCESS FOR INTERMEDIATE
Ch. 15 - Prob. 15.2QCh. 15 - Prob. 15.3QCh. 15 - Prob. 15.4QCh. 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...
Ch. 15 - Briefly describe the conceptual basis for asset...Ch. 15 - In a financing lease, front loading of lease...Ch. 15 - The discount rate influences virtually every...Ch. 15 - A lease that has a lease term (including any...Ch. 15 - A lease might specify that lease payments may be...Ch. 15 - What is a purchase option? How does it affect...Ch. 15 - A six-year lease can be renewed for two additional...Ch. 15 - Culinary Creations leased kitchen equipment under...Ch. 15 - What situations cause us to remeasure a lease...Ch. 15 - Prob. 15.21QCh. 15 - Compare the way a purchase option that is...Ch. 15 - What nonlease costs might be included as part of...Ch. 15 - The lessors initial direct costs often are...Ch. 15 - When are initial direct costs recognized in an...Ch. 15 - Prob. 15.26QCh. 15 - Prob. 15.27QCh. 15 - Prob. 15.28QCh. 15 - When a company sells an asset and simultaneously...Ch. 15 - Prob. 15.30QCh. 15 - Lease classification LO151 (Note: Brief Exercises...Ch. 15 - Lease classification LO151, LO152 Corinth Co....Ch. 15 - Lessee and lessor; calculate interest;...Ch. 15 - Finance lease; lessee; balance sheet effects ...Ch. 15 - Finance lease; lessee; income statement effects ...Ch. 15 - Sales-type lease; lessor; income statement effects...Ch. 15 - Prob. 15.7BECh. 15 - Operating lease LO154 (Note: Brief Exercises 8...Ch. 15 - Operating lease LO154 At the beginning of its...Ch. 15 - Short-term lease LO155 King Cones leased ice...Ch. 15 - Uncertain lease term LO156 Java Hut leased a...Ch. 15 - Uncertain lease payments LO156 On January 1,...Ch. 15 - Purchase option; lessor; sales-type lease LO152,...Ch. 15 - Residual value; sales-type lease LO152, LO153,...Ch. 15 - Guarantee d residual value LO156 On January 1,...Ch. 15 - Lessors initial direct costs; sales-type lease ...Ch. 15 - Lease classification LO151 Each of the four...Ch. 15 - Prob. 15.9ECh. 15 - Lessor calculation of annual lease payments;...Ch. 15 - Sales-type lease; lessor; income statement effects...Ch. 15 - Calculation of annual lease payments; residual...Ch. 15 - Lease concepts; finance/sales-type leases;...Ch. 15 - Calculation of annual lease payments; purchase...Ch. 15 - Prob. 15.37ECh. 15 - Prob. 15.38ECh. 15 - Prob. 15.39ECh. 15 - Lessors initial direct costs; operating and...Ch. 15 - Research Case 151 FASB codification; locate and...Ch. 15 - Ethics Case 153 Leasehold improvements LO153...Ch. 15 - Communication Case 155 Wheres the gain? Appendix...Ch. 15 - Prob. 15.6DMPCh. 15 - Prob. 1CCTCCh. 15 - Prob. 2CCTC
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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
- Please answerarrow_forwardExercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $14,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $99,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the…arrow_forwardPlease answerarrow_forward
- Visnoarrow_forwardam.105.arrow_forwardBE 15-9 Operating lease; financial statement effects LO15-4 At the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a seven-year operating lease agreement. The contract calls for quarterly rent payments of $25,000 each. The office building was acquired by Lakeside at a cost of $2 million and was expected to have a useful life of 25 years with no residual value. What will be the effect of the lease on Lakeside's earnings for the first year (ignore taxes)?arrow_forward
- sarrow_forwardcharrow_forwardProblem 2 ABC Company signed a ten-year noncancelable lease agreement to lease a storage building to a lessee under a sales type lease at the start of this year. At the conclusion of each year, the agreement demanded equal rental payments. The building's fair market value is P7,530,000. The building's carrying amount, on the other hand, is P6,420,000. The structure has a twelve-year projected economic life and no residual value. The title to the building will be transferred to the lessee at the end of the lease. The yearly rental was established by ABC to ensure a 12% return on investment. The lessee is aware of the lessor's implicit rate. The entire yearly lease payment includes P300,000 in executory costs for property taxes. What is the minimum annual lease payment? b. What is the total annual lease payment?arrow_forward
- Brief Exercise 15-16 (Algo) Lessor's Initial direct costs; sales-type lease [LO15-3, 15-7] Bryant leased equipment that had a retall cash selling price of $700,000 and a useful life of four years with no residual value. The lessor spent $580,000 to manufacture the equipment and used an implicit rate of 9% when calculating annual lease payments of $198.228 beginning January 1, the beginning of the lease. Lease payments will be made January 1 each year of the lease. Incremental costs of consummating the lease transaction incurred by the lessor were $20,000. What is the effect of the lease on the lessor's earnings during the first year, not including any effect of depreciation no longer required on the asset under lease (Ignore taxes)? Note: Input decreases to Income as negative amounts. Impact on lessor's pretax earningsarrow_forward25 Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $19 million. This noncancelable lease had the following terms: • Lease payments: $3,287,947 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. • Lease term: 5 years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 9% semiannually. • Fair value of the computers on January 1, 2024: $23 million. . What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $17,698,200arrow_forwardHrd.4arrow_forward
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