The implicit rate of the lease. Given information: Lease term is 4 years. Economic life of equipment is 10 years. There is no purchase option in the lease. There is no transfer of title clause in the lease. Estimated unguaranteed residual value is $1,200. Fair value of the asset is $18,000. Carrying value of asset is $15,500. Annual lease payments are $4,500.

Question

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Answer 1

Question

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

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Answer 2

Question

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

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Answer 3

Question

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

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Answer 4

Question

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

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Answer 5

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

Answer 6

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

Answer 7

Chapter 18, Problem 18.8P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

Answer 8

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

Answer 9

b.

To determine

The classification of lease.

Given information:

Lease term is 4 years.

Economic life of equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of asset is $15,500.

Annual lease payments are $4,500.

Answer 10

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

Answer 11

c.

To determine

To prepare: The journal entries for the lessor under operating lease.

Given information:

Lease term is 4 years.

Economic life of the equipment is 10 years.

There is no purchase option in the lease.

There is no transfer of title clause in the lease.

Estimated unguaranteed residual value is $1,200.

Fair value of the asset is $18,000.

Carrying value of the asset is $15,500.

Annual lease payments are $4,500.

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...

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Chapter 18 Solutions