The classification of lease for lessee. Given information: Lease term is 10 years. Economic life of asset is 15 years. Fair value of the asset is $568,548. Cost of asset is $500,000. Implicit interest rate is 5% Annual lease payments are $70,000 due on Jan/1 each year Initial direct cost to lessee is $7,452.

Question

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Answer 1

Question

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

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Answer 2

Question

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

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Answer 3

Question

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

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Answer 4

Question

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

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Answer 5

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 6

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 7

Chapter 18, Problem 18.13E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 8

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 9

b.

To determine

To prepare: The amortization tables for the first three years of the lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 10

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 11

c.

To determine

To prepare: The journal entries for the lessee for the first year.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 12

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 13

d.

To determine

To prepare: The journal entries for the lessee for the first year in case the lease is operating lease.

Given information:

Lease term is 10 years.

Economic life of asset is 15 years.

Fair value of the asset is $568,548.

Cost of asset is $500,000.

Implicit interest rate is 5%

Annual lease payments are $70,000 due on Jan/1 each year

Initial direct cost to lessee is $7,452.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2Q Ch. 18 - Prob. 18.3Q Ch. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6Q Ch. 18 - How is the right-of-use asset measured?Ch. 18 - What components are included in a lease contract?Ch. 18 - How does a lessee separate lease and nonlease...Ch. 18 - How does a lessor separate lease and nonlease...

Solution Summary: The author explains that lease is a long term rent agreement between two parties that is often clubbed with other clauses relating to maintenance or sale at the end of the lease period.

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