Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 18, Problem 18.1BE
Identifying Lease and Nonlease Components. Deane Company leases office space from Blossom Building Associates for a term of 20 years in order to expand its operations into the region of the state. The office space includes the use of office equipment and computer equipment. In addition, Blossom will provide maintenance of all items of equipment included in the agreement and basic repairs and maintenance of the office as needed (e.g., air conditioning, cleaning services, and elevator repairs). The maintenance is included in the annual lease payments. How many lease components are included in the contract and specifically, what are they?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
1. Clavel County leases an office building with a remaining economic life of 20 years. The fair market value of the building is $6 million. Annual lease payments are agreed at $523,107, based on a 6 percent interest rate. The lease meets the conditions for a capital lease.Record the lease and the first year’s interest payment
(a) In a governmental fund
(b) In the government-wide statements
2. Should the office building be depreciated? If so, how and where should depreciation be recorded?
3. Suppose the lease did not meet the conditions for a capital lease. How and where should the lease be recorded? Should the office building be depreciated? If so, how and where should depreciation be reported?
On January 1, 2016, Bise Company signed an eight-year lease for office space. The entity has the option to renew the lease for an additional six-year period on or before January 1, 2022. In early part of 2018, the entity incurred the following costs:
Improvements to the leased premises with useful life of 10 years, P5,400,000
Office furniture and equipment with useful life of 8 years, P2,400,000
Moveable assembly line equipment with useful life of 5 years, P1,800,000
On December 31, 2018, Bise’s intention as to the exercise of the renewal option is uncertain. A full depreciation of leasehold improvements is taken in the year of acquisition. On December 31, 2018, what amount of accumulated depreciation of leasehold improvements should be reported?
Please answer all the sub-parts 1-4. I badly need it. And please provide concrete solution as well as explanation. Thank you so much.
Chapter 18 Solutions
Intermediate Accounting
Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2QCh. 18 - Prob. 18.3QCh. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6QCh. 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...
Ch. 18 - Does a lessee have an option not to separate lease...Ch. 18 - What are the criteria for a lessee to report a...Ch. 18 - Prob. 18.13QCh. 18 - Can the lessor account for a lease either as an...Ch. 18 - What is the difference in the lessees lease...Ch. 18 - How does a guaranteed residual value affect the...Ch. 18 - Prob. 18.17QCh. 18 - What discount rate does the lessee use to...Ch. 18 - Does the choice of discount rate (i.e., the lessee...Ch. 18 - Prob. 18.20QCh. 18 - Prob. 18.21QCh. 18 - Prob. 18.22QCh. 18 - How does a lessee measure the lease liability?Ch. 18 - What is the lessees short-term lease policy...Ch. 18 - Prob. 18.25QCh. 18 - What are the lessee s accounting and reporting...Ch. 18 - Prob. 18.27QCh. 18 - Prob. 18.28QCh. 18 - Prob. 18.29QCh. 18 - How does the lessor measure the net investment in...Ch. 18 - Prob. 18.31QCh. 18 - Prob. 18.32QCh. 18 - Prob. 18.33QCh. 18 - Baxter Brothers, Inc. enters into a four-year...Ch. 18 - Zhou Systems signed a 5-year lease at the...Ch. 18 - Insight Corporation leases equipment for 5 years...Ch. 18 - Lowe Leasing Company recently leased machinery to...Ch. 18 - Prob. 18.5MCCh. 18 - Prob. 18.6MCCh. 18 - Prob. 18.7MCCh. 18 - Bischoff Enterprises leases office space from...Ch. 18 - Identifying Lease and Nonlease Components. Deane...Ch. 18 - Prob. 18.2BECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as a Finance or Operating Lease,...Ch. 18 - Prob. 18.7BECh. 18 - Prob. 18.8BECh. 18 - Prob. 18.9BECh. 18 - Classification of Lease, Lessor, IFRS. Repeat the...Ch. 18 - Prob. 18.11BECh. 18 - Finance Lease, Lessee, Lessor, Guaranteed Residual...Ch. 18 - Finance Lease, Lessee, Lessor, Unguaranteed...Ch. 18 - Composition of Lease Payments, Variable Payments....Ch. 18 - Composition of Lease Payments. Variable Payments....Ch. 18 - Determining the Implicit Rate In the Lease. Assume...Ch. 18 - Prob. 18.17BECh. 18 - Prob. 18.18BECh. 18 - Prob. 18.1ECh. 18 - Allocation of Total Payments to Lease and Nonlease...Ch. 18 - Operating Lease, Nonlease Components, Lessee....Ch. 18 - Operating Lease, Rate or Index, Effect of Variable...Ch. 18 - Prob. 18.5ECh. 18 - Prob. 18.6ECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.9ECh. 18 - Prob. 18.10ECh. 18 - Prob. 18.11ECh. 18 - Prob. 18.12ECh. 18 - Prob. 18.13ECh. 18 - Finance Lease, Purchase Option, Lessee,...Ch. 18 - Prob. 18.15ECh. 18 - Prob. 18.16ECh. 18 - Prob. 18.17ECh. 18 - Operating Lease, Lessor. True Image Copier Company...Ch. 18 - Operating Lease, Lessee, Amortization Schedules,...Ch. 18 - Prob. 18.20ECh. 18 - Prob. 18.21ECh. 18 - Classification as Finance or Operating Lease....Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance, Sales-Type, or...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.8PCh. 18 - Prob. 18.9PCh. 18 - Prob. 18.10PCh. 18 - Prob. 18.11PCh. 18 - Direct Financing Lease, Deferred Selling Profit,...Ch. 18 - Cases Judgment Cases Judgment Case 1: Comparison...Ch. 18 - Judgment Case 2: Lease Classification On January...Ch. 18 - Prob. 1FSCCh. 18 - Prob. 2FSCCh. 18 - Surfing the Standards Case 1: Lease Contracts...Ch. 18 - Prob. 2SSCCh. 18 - Prob. 3SSCCh. 18 - Basis for Conclusions Case 1: Operating Lease...Ch. 18 - Prob. 2BCCCh. 18 - Basis for Conclusions Case 3: Lease Classification...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Using the information from Problem 1-2B and the inventory information for the Best Bikes below, complete the re...
Managerial Accounting
Preparing Financial Statements from a Trial Balance The following accounts are taken from Equilibrium Riding, I...
Fundamentals Of Financial Accounting
Calculating certain information using the direct method (Learning Objective 4) 20-25 min. Trudeaus Marine, Inc....
Financial Accounting, Student Value Edition (5th Edition)
The amount that should be recorded by Company R for building under historical cost principle.
Financial Accounting (11th Edition)
How is activity-based costing useful for pricing decisions?
Cost Accounting (15th Edition)
This year, Prewer Inc. received a 160,000 dividend on its investment consisting of 16 percent of the outstandin...
Principles Of Taxation For Business And Investment Planning 2020 Edition
Knowledge Booster
Learn more about
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
- Assume that a town leases equipment on a capital lease. The present value of the leased equipment is $65,000. The city, subsequently, pays $6,500 on the lease, $3,900 of which is designated as interest and the remainder to a reduction of the lease obligation: Required: Prepare the journal entry to record the acquisition of equipment via lease and the subsequent payment.arrow_forwardIn 2024, Sheffield Enterprises negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On January 1, 2025, Sheffield took possession of the leased property. The 20-year lease is effective for the period January 1, 2025, through December 31, 2044. Advance rental payments of $772,000 are payable to the lessor (owner of facilities) on January 1 of each of the first 10 years of the lease term. Advance payments of $430,000 are due on January 1 for each of the last 10 years of the lease term. Sheffield has an option to purchase all the leased facilities for $1 on December 31, 2044. At the time the lease was negotiated, the fair value of the truck terminals and freight storage facilities was pproximately $7,601,000. If the company had borrowed the money to purchase the facilities, it would have had to pay 9% interest. Compute the present value of lease vs purchase.…arrow_forwardAt the beginning of the current year, an entity leased a building from a lessor with the following pertinent information What is the cost of the right of use asset?arrow_forward
- Provide step by step solution.arrow_forwardIdentified Asset A customer enters into a 3-year contract with the Raleigh Sports Arena for the right to occupy a luxury box at events. Each luxury box has 20 individual seats. The contract provides that the customer will have the use of 90% of the luxury boxs scats at all events throughout the contracts term. Required: 1. Is the capacity portion of the luxury box an identified asset? 2. Is the capacity portion of the luxury box an identified asset if the customer only had the use of 70% of the luxury boxs capacity instead of 90%?arrow_forwardOn January 1, 2021, Winn Heat Transfer leased office space under a three-year lease agreement. The arrangement specified three annual rent payments of $80,000 each, beginning January 1, 2021, the inception of the lease, and at each January 1 through 2023. Winn also paid a $96,000 advance payment at the inception of the lease in addition to the first $80,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. The implicit rate of the lease is 8% per annum, which is also Winn’s incremental borrowing rate. Required: Prepare the appropriate entries for Winn Heat Transfer from the inception of the lease through the end of 2021. Winn’s financial year is the calendar year. Winn uses straight-line depreciation.arrow_forward
- On January 1, 2023, Carla Vista Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $426,000 and Carla Vista purchased it from Manufacturing Solutions Ltd. specifically for Rock River. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses Carla Vista $4,700 each January 1 for a portion of the repairs and maintenance expenditures, which cost Carla Vista a total of $6,300 per year. At the end of the five-year agreement, the compression equipment will revert to Carla Vista and is expected to have a residual value of $27,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Carla Vista. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN…arrow_forwardAccounting SBITAS are accounted for similarly to leases. A city signs a three- year licensing agreement with a soft-ware company for use of a payroll management system in its electrical utility fund. Annual charges are $10,000 per year. It is the policy of the city to use a discount rate of 6 percent to value right- to- use assets when an interest rate is not explicitly stated in a lease or comparable agreement. It also depreciates all capital and similar assets on a straight- line basis. The subscription period runs from January 1, 20X1 through December 31, 20X3, with payment due on January 1 of each of the three years. 1. Prepare a journal entries to record the start of the licensing agreement on January 1, 20X1 in its electrical utility fund (a proprietary fund) as well as the first payment of $10,000. 2. Prepare an entry to record an appropriate journal entry on December 31, 20X1. 3. Prepare an entry to record the second payment of $10,000 on January 1, 20X2.arrow_forwardLand City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.arrow_forward
- On January 1, 2018, the Yam Company leased a portion of the commercial building owned by Ying Commercial Company. The lease expires on December 31, 2025. Extensive work was done on the leased property for the construction of a restaurant considered as covid-19 safe. The improvements, costing P1,344,000, were completed on March 31, 2018. The estimated useful life of the improvement was 10 years. During 2021, because of favorable business operations in the area, Yam negotiated for the extension of the lease term by an additional 3 years, ending on December 31, 2028.Yam Company provides full year depreciation during the year of acquisition and no depreciation in the year of disposal. How much is the depreciation expense on the leasehold improvements for the year ended December 31, 2021?arrow_forwardRespond to the requirements in each situation. Instructions a. On January 1, 2020, Zarle Inc. sold computer equipment to Daniell Co. The sales price of the equipment was $520,000 and its carrying amount is $400,000. Record any journal entries necessary for Zarle from the sale of the computer equipment in 2020. b. Use the information from part a. Assume that, on the same day the sale occurred, Zarle enters into an agreement to lease the equipment from Daniell for 10 years with annual lease payments of $67,342.42 at the end of each year, beginning on December 31, 2020. If Zarle has an incremental borrowing rate of 5% and the equipment has an economic useful life of 10 years, record any journal entries necessary for Zarle from the sale and leaseback of computer equipment in 2020. c. Use the information from part b. Now, instead of 10 years, the lease term is only 3 years with annual lease payments of $67,342.42 at the beginning of each year. Record any journal entries necessary…arrow_forwardKendall County entered into a lease agreement to finance computer equipment used in government offices. The lease covers three years, and county officials are reasonably certain that funding and approvals will be renewed annually. At the inception of the lease, a payment of $640,000 will be made; two additional annual lease payments of $640,000 are to be made near the end of each year. The total amount to be paid under this lease is $1,920,000. The lease arrangements implied an annual interest rate of 3 percent. Therefore, the present value of the lease at inception, including the initial payment, is $1,864,620. Assume that the fair value of the equipment at the inception of the lease is $1,900,000. What amount would the liability be reported at the end of the first yeararrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningBusiness Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage
What is Fund Accounting?; Author: Aplos;https://www.youtube.com/watch?v=W5D5Dr0j9j4;License: Standard Youtube License