EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
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Chapter 20, Problem 15P
To determine
Identify the type of lease from both lessor (Company R) and lessee (Company C) point of view.
2.
To determine
Explain the reason for that the final two criteria are not applicable when classifying a lease of land.
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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).…
(Lessor Entries; Direct-Financing Lease with Option to Purchase) Castle Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Jan Way Company. The term of the noncancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement:1. Jan Way Company has the option to purchase the equipment for $16,000 upon termination of the lease.2. The equipment has a cost and fair value of $160,000 to Castle Leasing Company. The useful economic life is 2 years, with a salvage value of $16,000.3. Jan Way Company is required to pay $5,000 each year to the lessor for executory costs.4. Castle Leasing Company desires to earn a return of 10% on its investment.5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.Instructions(a) Prepare the journal entries on the books of Castle Leasing to reflect the…
Sax Company signs a lease agreement dated January 1, 2016, that provides for it to lease computers from Appleton Company beginning January 1, 2016. The lease terms, provisions, and related events are as follows:
1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year.
2. The computers have an estimated life of 5 years, a fair value of $300,000, and a zero estimated residual value.
3. Sax agrees to pay all executory costs.
4. The lease contains no renewal or bargain purchase option.
5. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate, which is
equal to its borrowing rate.
6. Sax uses the straight-line method to record depreciation on similar equipment.
Required:
1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax.
2. Calculate the amount of the asset and liability of Sax at…
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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