The classification of lease for both lessee and lessor. Given information: Asset is not specialized in nature. Cost of asset is $180,000. Lease term is 5 years. Lease doesn’t contain transfer of ownership. Economic life of asset is 5 years. Fair value of the asset is $196,898. Implicit interest rate is 8% Annual lease payments are $44,880 due on Jul/1 each year Accounts are closed on 31/Dec each year.

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Answer 1

Question

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

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Answer 2

Question

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

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Answer 3

Question

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

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Answer 4

Question

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

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Answer 5

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

Answer 6

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

Answer 7

Chapter 18, Problem 18.17E

a.

To determine

The classification of lease for both lessee and lessor.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year

Accounts are closed on 31/Dec each year.

Answer 8

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

Answer 9

b.

To determine

To prepare: The journal entries for lessee for the first two years.

Given information:

Asset is not specialized in nature.

Cost of asset is $180,000.

Lease term is 5 years.

Lease doesn’t contain transfer of ownership.

Economic life of asset is 5 years.

Fair value of the asset is $196,898.

Implicit interest rate is 8%

Annual lease payments are $44,880 due on Jul/1 each year.

Answer 10

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Answer 11

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Answer 12

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Answer 13

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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