The implicit rate of the lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year
The implicit rate of the lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
Chapter 18, Problem 18.10P
a.
To determine
The implicit rate of the lease.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
b.
To determine
The classification of lease for lessee.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
c.
To determine
To prepare: The journal entries for commencement of lease.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
d.
To determine
To prepare: The journal entries up to beginning of second year of lease.
Given information:
Lease term is 5 years.
Economic life of equipment is 30 years.
Fair value of the asset is $8,500,000.
Exercise price of option is $5,500,000.
Carrying value of asset is $6,500,000.
Annual lease payments are $983,199 due on Jan/1 each year
Summit Industries' accounting records reflect the following inventories:
Dec. 31, 2021 Dec. 31, 2020
Raw materials inventory: $250,000 $230,000
Work in process inventory: $350,000 $300,000
During 2021, $500,000 of raw materials were purchased, direct labor costs
amounted to $600,000, and manufacturing overhead incurred was
$520,000.
Calculate Summit Industries' total cost of goods manufactured in 2021.
Brahma Manufacturing uses a job order cost system and applies overhead based on estimated rates. The overhead application rate is based on total estimated overhead costs of $310,000 and direct labor hours of 10,500. During the month of March 2022, actual direct labor hours of 11,200 were incurred. Use this information to determine the amount of factory overhead that was applied in March. (Round the answer to the nearest whole dollar.)