Pearson eText Intermediate Accounting -- Instant Access (Pearson+)
3rd Edition
ISBN: 9780136946649
Author: Elizabeth Gordon, Jana Raedy
Publisher: PEARSON+
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Chapter 18, Problem 18.7E
Classification as Finance or Operating Lease, Lessee, Journal Entries, Amortization Tables, Unguaranteed Residual Asset, Annuity Due. On January 1, Gump Sales Company entered into an agreement to lease a piece of machinery for a period of 5 years from Smokey Boy Equipment (SBE). The machine is not specialized for Gump’s business needs, has a sales price of $70,000, and its useful life is 7 years with no guaranteed residual value. The $15,000 annual rentals are due on January 1 of each year. The lease does not contain a transfer of ownership or a purchase option Assume that there are no initial direct costs associated with this lease. There are also no nonlease components SBE's implicit rate is not known to Gump whose incremental borrowing rate is 13%. The carrying value of the equipment to SBE is $70,000, its fair value. Assume that collectability of all lease payments is reasonably assured Gump's fiscal year ends on December 31.
Required
- a. Determine the lease classification for Gump Sales.
- b. Prepare the journal entries over Years 1-3 for Gump Sales based on your answer to part (a).
- c. Include an amortization table for the lease liability and right-of-use asset.
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Chapter 18 Solutions
Pearson eText Intermediate Accounting -- Instant Access (Pearson+)
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...
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