The classification of lease for both lessee and lessor. Given information: Lease term is 9 years. Lease doesn’t contain transfer of ownership. Lease doesn’t contain a purchase option. Economic life of asset is 9 years. Fair value of the asset is $1,349,328. Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year. Implicit interest rate is 8% Annual lease payments are $200,000 due on Jan/1 each year

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Answer 1

Question

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

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Answer 2

Question

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

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Answer 3

Question

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

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Answer 4

Question

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

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Answer 5

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 6

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 7

Chapter 18, Problem 18.15E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 8

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 9

b.

To determine

To prepare: The amortization tables for the lease term.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 10

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 11

c.

To determine

To prepare: The journal entries for lessor for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Cost of asset is $1,300,000.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 12

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

Answer 13

d.

To determine

To prepare: The journal entries for lessee for year one.

Given information:

Lease term is 9 years.

Lease doesn’t contain transfer of ownership.

Lease doesn’t contain a purchase option.

Economic life of asset is 9 years.

Fair value of the asset is $1,349,328.

Maintenance charges (general and administrative expenses) $5,600 payable at the end of each year.

Implicit interest rate is 8%

Annual lease payments are $200,000 due on Jan/1 each year

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 clubbed with other clauses relating to maintenance or sale.

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