EBK INTERMEDIATE ACCOUNTING: REPORTING
2nd Edition
ISBN: 9781337268998
Author: PAGACH
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 20, Problem 2MC
To determine
Identify the amount that Company E records as a capitalized legal asset.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Daniel Company leased a new machine from Keriboomboom Company on January 1, 2016, under a lease with the following information:
Annual rental payable at beginning of each lease year P400,000
Initial direct cost paid by the lessee 200,000
Lease term 10 years
Useful life of machine 12 years
Implicit interest rate 14%
Daniel has the option to purchase the machine on January 1, 2016, by paying P500,000, which approximates the expected fair value of the machine on the option exercise date. On January 1, 2016, Daniel should record a capitalized leased asset at:
Use 2 decimal points in computing for the PV
Lansing East leased high-tech electronic equipment from Davis Computing on January 1, 2021. Davis Computing manufactured the
equipment at a cost of $42,500. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
Related Information:
Lease term
Quarterly rental payments
Economic life of asset
Fair value of asset
Implicit interest rate
2 years (8 quarterly periods)
$7,500 at the beginning of each period
2 years
$56,040
8%
Required:
1. Show how Davis Computing determined the $7,500 quarterly rental payments.
2. Prepare appropriate journal entries for Davis Computing to record the lease at its beginning, January 1, 2021, and the second lease
payment on April 1, 2021.
Ivanhoe Leasing Company agrees to lease equipment to Shamrock Corporation on January 1, 2025. The following information relates
to the lease agreement.
1.
2.
3.
4.
5.
6.
The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
The cost of the machinery is $569,000, and the fair value of the asset on January 1, 2025, is $682,000.
At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Shamrock
estimates that the expected residual value at the end of the lease term will be $55,000. Shamrock amortizes all of its leased
equipment on a straight-line basis.
The lease agreement requires equal annual rental payments, beginning on January 1, 2025.
The collectibility of the lease payments is probable.
Ivanhoe desires a 9% rate of return on its investments. Shamrock's incremental borrowing rate is 10%, and the lessor's
implicit rate is unknown.
(Assume the accounting period ends on…
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Pina Leasing Company agrees to lease equipment to Grouper Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2025, is $681,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Grouper estimates that the expected residual value at the end of the lease term will be $50,000. Grouper amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Pina desires a 9% rate of return on its investments. Grouper's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December…arrow_forwardSheridan Corp., which uses IFRS, signs non-renewable, non-cancellable lease agreement to lease robotic equipment from Sunland Inc. The following information concerns the lease agreement. Inception date Lease term Fair value of equipment Jan. 1, 2023 Economic life of leased equipment Annual rental payments starting Jan. 1, 2023 Option to purchase at the end of the term Depreciation method Residual value Sheridan's incremental borrowing rate (a) January 1, 2023 5 years $270,000 7 years $48,399 The amount of the right-of-use asset $ none Straight-line Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. none Date Account Titles and Explanation Jan. 1, 2023 9% Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Prepare the initial entry to reflect the signing of the lease…arrow_forwardplease answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image)arrow_forward
- East Company leased a new machine from North Company on January 1, 2021 under a lease with the following information:Annual rental payable at the beginning of each lease year P 400,000Lease term 10 yearsUseful life of the machine 12 yearsImplicit interest rate 14%Incremental borrowing rate of the lessee 12%Initial direct costs 100,000East Company has the option to purchase the machine on January 1, 2031 by paying P500,000 which approximates the expected fair value of the machine on the option exercise date. 1. At the commencement of the lease, what amount should be recognized as finance lease liability? 2. What would be the carrying amount of the leased asset in the records of East Company as of December 31, 2023? 3. The balance of the finance lease liability as of December 31, 2024 is:arrow_forwardUsing PV factor tables or excel calculate the amount Oricole will record for the right of use asset.Round PV factor to 5 decimal places and final answer to 2 decimal places. Also prepare the initial journal entry for the signing of the lease.arrow_forwardPlease help mearrow_forward
- 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 workingsarrow_forwardThe following facts pertain to a non-cancelable lease agreement between Wildhorse Leasing Company and Windsor Company, a lessee. Commencement date June 1, 2025 Annual lease payment beginning with June 1, 2025 $19,998.50 Bargain purchase option price at end of lease term $7,000.00 Lease term Economic life of leased equipment (no salvage value) Lessor's cost Fair value of asset at June 1, 2025 4 years 12 years $56,000 $78,999 Lessor's implicit rate (known to lessee) 6% Lessee's incremental borrowing rate 69 The collectibility of the lease payments by Wildhorse is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) (b) (c) Your answer is partially correct. Prepare a lease amortization schedule for Windsor for the 4-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) WINDSOR COMPANY (Lessee) Date 6/1/25 $ 6/1/25 6/1/26 6/1/27 6/1/28 5/31/29 Annual Lease Payment Plus BPO $ Lease…arrow_forwardEdison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $112,080. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 88 Required: Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal year ends December 31. Complete this question by entering your answers in the tabs below. Amort Schedule General Journal Prepare a lease amortization schedule for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal year ends December 31.…arrow_forward
- Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026 • The lease agreement specified annual payments of $47,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $56,000 when its fair value was expected to be $71,000, a sufficient difference that exercise seems reasonably certain. • The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12%. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…arrow_forwardFederated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. ⚫ The lease agreement specified annual payments of $44,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. • The company had the option to purchase the machine on December 30, 2026, for $53,000 when its fair value was expected to be $68,000, a sufficient difference that exercise seems reasonably certain. • The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 9%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…arrow_forwardCrane Leasing Company signs an agreement on January 1, 2025, to lease equipment to Cullumber Company. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. (a) The cost of the asset to the lessor is $401,000. The fair value of the asset at January 1, 2025, is $401,000. 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 $22,050, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2025. Collectibility of the lease payments by Crane is probable. Click here to view factor tables. Assuming the lessor desires an 6% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Depreciation -MACRS; Author: Ronald Moy, Ph.D., CFA, CFP;https://www.youtube.com/watch?v=jsf7NCnkAmk;License: Standard Youtube License