EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
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Chapter 20, Problem 15E
1.
To determine
Prepare the journal entries for the seller-lessee Company S, for 2016 to reflect the ales and lease back agreement.
2.
To determine
Discuss the accounting treatment of the gain by the seller-lessee and prepare the
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Subject: acounting
On 1 July 2015, Vertical Ltd leased a processing plant to Bell Ltd. The plant was purchased by Vertical Ltd on 1 July 2019 for its fair value of $959,424. The lease agreement contained the following provisions:
Lease term
3 years
Economic life of plant
5 years
Present value of MLP
$934,224
Annual rental payment, in arrears (commencing 30/6/2020)
$300,000
Residual value at end of the lease term
$157,594
Residual guaranteed by lessee
$127,594
Interest rate implicit in lease
6%
The lease is cancellable only with the permission of the lessor.
Bell Ltd intends to return the processing plant to the lessor at the end of the lease term.
The lease has been classified as a finance lease by both the lessee and the lessor.
Required
Prepare the lease receipt schedule for the lessor (show all workings
On January 1, 2020, Morris Company sells land to Lopez Corporation for $10,000,000, and immediately leases the
land back. The following information relates to this transaction:
1.
The term of the noncancelable lease is 20 years and the title transfers to Morris Company at the end of the lease
term.
2.
The land has a cost basis of $8,400,000 to Morris.
3.
The lease agreement calls for equal rental payments of $943,074 at the beginning of each year.
4.
The land has a fair value of $10,000,000 on January 1, 2020.
The incremental borrowing rate of Morris Company is 10%. Morris is aware that Lopez Corporation set the annual
rentals to ensure a rate of return of 8%.
5.
6.
Morris Company pays all executory costs which total $255,000 in 2020.
7. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the
costs yet to be incurred by the lessor.
Instructions
Prepare the journal entries for the entire year 2020 on the books of Morris Company…
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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