The classification of lease for lessee. Given information: Lease term is 3 years. Lease doesn’t provide transfer of title. Economic life of asset is 10years. Fair value of the equipment is $9,000 Implicit interest rate is 6% Annual lease payments are $700 subject to annual increase of 15%. Lease rents are payable in the beginning.

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Answer 1

Question

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

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Answer 2

Question

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

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Answer 3

Question

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

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Answer 4

Question

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

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Answer 5

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 6

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 7

Chapter 18, Problem 18.20E

a.

To determine

The classification of lease for lessee.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 8

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 9

b.

To determine

The initial measurement of right of use asset and lease liability and preparation of amortization tables for the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 10

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 11

c.

To determine

To prepare: The journal entries over the lease term.

Given information:

Lease term is 3 years.

Lease doesn’t provide transfer of title.

Economic life of asset is 10years.

Fair value of the equipment is $9,000

Implicit interest rate is 6%

Annual lease payments are $700 subject to annual increase of 15%.

Lease rents are payable in the beginning.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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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