The implicit rate of the lease. Given information: Lease term is 5 years. Economic life of the 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 1

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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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Orion Enterprises data for the year 2019 is presented below: • Credit sales during the year: $5,200,000 • Accounts receivable - December 31, 2019: $480,000 • Allowance for bad debts - December 31, 2019: $40,000 ⚫ Bad debt expense for the year: $25,000 What amount will Orion Enterprises report on its year-end balance sheet for the net realizable value of its accounts receivable? A. $445,000 B. $440,000 C. $480,000 D. $460,000

Answer 2

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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 the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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 4

Question

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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 5

Chapter 18, Problem 18.9P

a.

To determine

The implicit rate of the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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 the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 the lease.

Given information:

Lease term is 5 years.

Economic life of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a lease for the lessor.

Given information:

Lease term is 5 years.

Economic life of the equipment is 30 years.

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

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

Carrying value of the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for the lessor for commencement of the lease.

Given information:

The 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 the 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 a sales-type lease for lessor up to the beginning of the second year of the 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 a sales-type lease for lessor up to the beginning of the second year of the 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

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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 the lease. Given information: Lease term is 5 years. Economic life of the 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 implicit rate of the lease. Given information: Lease term is 5 years. Economic life of the 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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Chapter 18 Solutions