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. Guaranteed residual value is $7,000.

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Answer 1

Question

Chapter 18, Problem 18.21E

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.

Guaranteed residual value is $7,000.

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 18.21E

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.

Guaranteed residual value is $7,000.

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 18.21E

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.

Guaranteed residual value is $7,000.

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 18.21E

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.

Guaranteed residual value is $7,000.

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 18.21E

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.

Guaranteed residual value is $7,000.

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 18.21E

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.

Guaranteed residual value is $7,000.

Answer 7

Chapter 18, Problem 18.21E

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.

Guaranteed residual value is $7,000.

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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