The implicit rate of lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year

Question

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Answer 1

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

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Answer 2

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

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Answer 3

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Expert Solution & Answer

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Answer 4

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Expert Solution & Answer

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Answer 5

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 6

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 7

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 8

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 9

b.

To determine

The classification of lease for lessor.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 10

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 11

c.

To determine

To prepare: The journal entries of sales type lease for lessor for commencement of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 12

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 13

d.

To determine

To prepare: The journal entries of sales type lease for lessor up to beginning of second year of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Answer 14

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Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

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...

The implicit rate of lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year

Solution Summary: The author explains the implicit interest rate of lease, which is the rate at which lease payments and residual value expected by lessor equate the cost of the asset and any direct initial cost.

Concept explainers

Videos

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year

Want to see the full answer?

Chapter 18 Solutions

The implicit rate of lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year

Solution Summary: The author explains the implicit interest rate of lease, which is the rate at which lease payments and residual value expected by lessor equate the cost of the asset and any direct initial cost.

Concept explainers

Videos

The implicit rate of lease. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year

The classification of lease for lessor. Given information: Lease term is 5 years. Economic life of equipment is 30 years. Fair value of the asset is $8,500,000. Exercise price of option is $5,500,000. Carrying value of asset is $6,500,000. Annual lease payments are $983,199 due on Jan/1 each year

Want to see the full answer?

Chapter 18 Solutions

The implicit rate of lease.

Given information:

Lease term is 5 years.

Economic life of equipment is 30 years.

Fair value of the asset is $8,500,000.

Exercise price of option is $5,500,000.

Carrying value of asset is $6,500,000.

Annual lease payments are $983,199 due on Jan/1 each year