EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
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Chapter 20, Problem 1E
1.
To determine
Identify the type of the lease for the lessee.
2.
To determine
Prepare the appropriate
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(Computation of Rental; Journal Entries for Lessor) Morgan Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement.1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000.3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed.4. Cole Company assumes direct responsibility for all executory costs.5. The agreement requires equal annual rental payments, beginning on January 1, 2017.6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.Instructions(Round all numbers to the nearest cent.)(a)…
On January 1, 2018, Yancey, Inc. signs a 10 year concancelable lease agreement to lease a storage building from Holt Warehouse company. Lease payments is predictable and no important uncertainties surround the amount of costs to be incurred by the lessor: Following information:
1. equal rental payments at beginning of each year
2. Fair value of building is $6,000,000, book value is $4,950,000
3. Building has a life of 10 years with no residual value. Yancey uses straight line method
4. At end of lease, ownership transfer to the lessee.
5. Yancey's borrowing rate is 11%. Holt set the annual rental to insure a 10% rate of return.
6. The yearly rental payment includes $15,000 of executory costs.
What is the amount of the total annual lease payment?
In your audit of Entity A, you noted that the Rent expense account has an ending balance of
$1,100,000 at December 31, 2021. $100,000 of this pertains to the maintenance costs paid by the
Lessor on behalf of Entity A, which was later paid by Entity A.
The lease commenced on January 1, 2021. The following are the terms of agreement.
Terms of the Lease Agreement
Lease term
8 years
Useful life
10 years
Annual rental payments due at
the end of the year
$1,000,000
Residual value at the end of useful life
$500,000
Bargain purchase option
200,000
Maintenance costs reimbursed to
lessor
100,000
8%
Implicit rate
Note: There is reasonable certainty that the purchase option will be exercised by Entity A at the end
of the lease term
Required:
1. Compute for the (a) initial lease liability and the cost of the right-of-use asset, (b) Depreciable
amount to be used and depreciation expense (c) Carrying amount of the lease liability and the right-
of-use asset at the end of the year.
2. Show adjusting…
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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