2nd Edition

ISBN: 9781305727557

Author: PAGACH

Publisher: YUZU

Concept explainers

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Textbook Question

Chapter 20, Problem 1RE

Next Level Keller Corporation (the lessee) entered into an equipment lease with Dallo Company (the lessor) on January 1 of Year 1. Use the following information to decide whether this lease qualifies as an operating or capital lease for Keller, and give an explanation using the four classification criteria.

1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2. The lease term is 8 years and requires annual payments of $10,000 at the end of each year.
3. The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4. The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.

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Chapter 20 Solutions

EBK INTERMEDIATE ACCOUNTING: REPORTING

Ch. 20 - Prob. 1GI Ch. 20 - What is the difference between the lessee and...Ch. 20 - Prob. 3GI Ch. 20 - Prob. 4GI Ch. 20 - Prob. 5GI Ch. 20 - Prob. 6GI Ch. 20 - What are the two types of lease classifications...Ch. 20 - Prob. 8GI Ch. 20 - Prob. 9GI Ch. 20 - Prob. 10GI

Ch. 20 - Prob. 11GI Ch. 20 - Describe the difference between how a lessee would...Ch. 20 - Prob. 13GI Ch. 20 - Prob. 14GI Ch. 20 - Prob. 15GI Ch. 20 - Prob. 16GI Ch. 20 - Prob. 17GI Ch. 20 - Prob. 18GI Ch. 20 - Prob. 19GI Ch. 20 - Prob. 20GI Ch. 20 - Prob. 21GI Ch. 20 - Prob. 1MC Ch. 20 - Prob. 2MC Ch. 20 - Prob. 3MC Ch. 20 - Prob. 4MC Ch. 20 - Prob. 5MC Ch. 20 - Prob. 6MC Ch. 20 - Prob. 7MC Ch. 20 - Prob. 8MC Ch. 20 - Rent received in advance by the lessor for an...Ch. 20 - Prob. 10MC Ch. 20 - Next Level Keller Corporation (the lessee) entered...Ch. 20 - Prob. 2RE Ch. 20 - Prob. 3RE Ch. 20 - Prob. 4RE Ch. 20 - Prob. 5RE Ch. 20 - Prob. 6RE Ch. 20 - Prob. 7RE Ch. 20 - Prob. 8RE Ch. 20 - Prob. 9RE Ch. 20 - Prob. 10RE Ch. 20 - Prob. 1E Ch. 20 - Prob. 2E Ch. 20 - Lessee Accounting Issues Sax Company signs a lease...Ch. 20 - Prob. 4E Ch. 20 - Prob. 5E Ch. 20 - Prob. 6E Ch. 20 - Prob. 7E Ch. 20 - Lessor Accounting with Receipts at Beginning of...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 10E Ch. 20 - Prob. 11E Ch. 20 - Prob. 12E Ch. 20 - Prob. 13E Ch. 20 - Prob. 14E Ch. 20 - Prob. 15E Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Prob. 2P Ch. 20 - Prob. 3P Ch. 20 - Lessee Accounting Issues Timmer Company signs a...Ch. 20 - Prob. 5P Ch. 20 - Prob. 6P Ch. 20 - Sales-Type Lease with Receipts at End of Year...Ch. 20 - Prob. 8P Ch. 20 - Prob. 9P Ch. 20 - Prob. 10P Ch. 20 - Prob. 11P Ch. 20 - Prob. 12P Ch. 20 - Prob. 13P Ch. 20 - Prob. 14P Ch. 20 - Prob. 15P Ch. 20 - Prob. 1C Ch. 20 - Prob. 2C Ch. 20 - Prob. 3C Ch. 20 - Classification of Leases Part a. Capital leases...Ch. 20 - Prob. 5C Ch. 20 - Prob. 6C Ch. 20 - Prob. 7C Ch. 20 - Prob. 8C Ch. 20 - Prob. 9C Ch. 20 - Prob. 10C Ch. 20 - Prob. 11C Ch. 20 - Prob. 12C Ch. 20 - Prob. 13C Ch. 20 - Prob. 14C Ch. 20 - Prob. 15C

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Solution Summary: The author identifies whether the given lease qualifies as an operating lease or finance lease, and explains the same.

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Chapter 20 Solutions