EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
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Chapter 20, Problem 10C
1 (a)
To determine
Explain the importance of comparing equipment’s fair value to its lease payments’ present value and its useful life to the lease term.
1 (b)
To determine
Evaluate Company P’s lease back of equipment in terms of each of the four criteria for determination of a capital lease.
2.
To determine
Explain the manner Company P should account for the sale portion of the sale lease back transaction at December 31, 2015.
3.
To determine
Explain the manner Company P should report the lease back portion of the sale lease back transaction on its December 31, 2016,
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Skor Co. leased equipment to Douglas Corp. on January 2, 2011, for an 8-year period expiring December 31, 2018. Equal payments under the lease are $600,000 and are due on January 2 of each year. The first payment was made on January 2, 2011. The cost of the equipment is $2,800,000. The lease is appropriately accounted for as a sales-type lease. The present value of the lease payments is $3,300,000.
What amount of net profit on the sale should Skor report for the year ended December 31, 2011?
a. $720,000
b. $500,000
c. $90,000
d. $600,000
e. $2,800,000
Berne Company (lessor) enters into a lease with Fox Company to lease equipment to Fox beginning January 1, 2016. The lease terms, provisions, and related events are as follows:
1. The lease term is 4 years. The lease
noncancelable and requires annual rental payments of $50,000 to be made at the end of each year.
2. The equipment costs $130,000. The equipment has an estimated life of 4 years and an estimated residual value at the end of the lease term of
zero
3. Fox agrees to pay all executory costs.
4. The interest rate implicit in the lease is 12%.
5. The initial direct costs are insignificant and assumed to be zero.
6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs
yet to be incurred by the lessor.
Required:
1. Next Level Determine if the lease is a sales-type or direct financing lease from Berne's point of view (calculate the selling price and assume
that this is also the fair value).…
On December 31, 2018 Corral Company enters into a five-year lease
agreement with Island Company (lessee) involving an equipment
(front-end loader). The equipment has a cost of P85,000 and with a
fair valuel selling price of P100,00o0. Island Company will pay
P23,237.09 per year at the beginning of each year. The equipment
has an estimated fair value of P5,000 at the 5-year lease term. The
imputed rate of interest at the time lease contract was signed is
10%. The contract is a sales type. If the residual value is guaranteed
by the lessee, what are the amounts of sales and cost of sales
should the lessor recognize on December 31, 2018 respectively? *
P95,000 and P80,000
P96,895.40 and P81,895.40
P97,450 and P85,000
P100,000 and P85,000
Chapter 20 Solutions
EBK INTERMEDIATE ACCOUNTING: REPORTING
Ch. 20 - Prob. 1GICh. 20 - What is the difference between the lessee and...Ch. 20 - Prob. 3GICh. 20 - Prob. 4GICh. 20 - Prob. 5GICh. 20 - Prob. 6GICh. 20 - What are the two types of lease classifications...Ch. 20 - Prob. 8GICh. 20 - Prob. 9GICh. 20 - Prob. 10GI
Ch. 20 - Prob. 11GICh. 20 - Describe the difference between how a lessee would...Ch. 20 - Prob. 13GICh. 20 - Prob. 14GICh. 20 - Prob. 15GICh. 20 - Prob. 16GICh. 20 - Prob. 17GICh. 20 - Prob. 18GICh. 20 - Prob. 19GICh. 20 - Prob. 20GICh. 20 - Prob. 21GICh. 20 - Prob. 1MCCh. 20 - Prob. 2MCCh. 20 - Prob. 3MCCh. 20 - Prob. 4MCCh. 20 - Prob. 5MCCh. 20 - Prob. 6MCCh. 20 - Prob. 7MCCh. 20 - Prob. 8MCCh. 20 - Rent received in advance by the lessor for an...Ch. 20 - Prob. 10MCCh. 20 - Next Level Keller Corporation (the lessee) entered...Ch. 20 - Prob. 2RECh. 20 - Prob. 3RECh. 20 - Prob. 4RECh. 20 - Prob. 5RECh. 20 - Prob. 6RECh. 20 - Prob. 7RECh. 20 - Prob. 8RECh. 20 - Prob. 9RECh. 20 - Prob. 10RECh. 20 - Prob. 1ECh. 20 - Prob. 2ECh. 20 - Lessee Accounting Issues Sax Company signs a lease...Ch. 20 - Prob. 4ECh. 20 - Prob. 5ECh. 20 - Prob. 6ECh. 20 - Prob. 7ECh. 20 - Lessor Accounting with Receipts at Beginning of...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 10ECh. 20 - Prob. 11ECh. 20 - Prob. 12ECh. 20 - Prob. 13ECh. 20 - Prob. 14ECh. 20 - Prob. 15ECh. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 2PCh. 20 - Prob. 3PCh. 20 - Lessee Accounting Issues Timmer Company signs a...Ch. 20 - Prob. 5PCh. 20 - Prob. 6PCh. 20 - Sales-Type Lease with Receipts at End of Year...Ch. 20 - Prob. 8PCh. 20 - Prob. 9PCh. 20 - Prob. 10PCh. 20 - Prob. 11PCh. 20 - Prob. 12PCh. 20 - Prob. 13PCh. 20 - Prob. 14PCh. 20 - Prob. 15PCh. 20 - Prob. 1CCh. 20 - Prob. 2CCh. 20 - Prob. 3CCh. 20 - Classification of Leases Part a. Capital leases...Ch. 20 - Prob. 5CCh. 20 - Prob. 6CCh. 20 - Prob. 7CCh. 20 - Prob. 8CCh. 20 - Prob. 9CCh. 20 - Prob. 10CCh. 20 - Prob. 11CCh. 20 - Prob. 12CCh. 20 - Prob. 13CCh. 20 - Prob. 14CCh. 20 - Prob. 15C
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