Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
2nd Edition
ISBN: 9781337912259
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 20, Problem 9E
Determining Type of Lease and Subsequent Accounting Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2016. The term of the noncancelable lease is 4 years. The following information about the lease is provided:
- 1. Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.
- 2. The cost and fair value of the car to Ravis Rent-A-Car is $8,400. The car has an economic life of 5 years.
- 3. The lease payments are determined at an amount that will yield Ravis Rent-A-Car a
rate of return of 10% on its net investment. - 4. Collectibility of the lease payments is reasonably assured.
- 5. There are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.
- 6. Equal annual lease payments are due at the end of each year.
Required:
- 1. Next Level Determine if the lease is an operating, sales-type, or direct financing lease from Ravis Rent-A-Car’s point of view. Why?
- 2. Prepare a table summarizing the lease receipts and interest revenue earned by the Ravis Rent-A-Car for the 4-year lease term.
- 3. Prepare the
journal entries for 2016 and 2017 to record the lease agreement, the lease receipts, and the recognition of income on the books of Ravis Rent-A-Car.
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Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided:
1.
Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.
2.
The cost and fair value of the car is $8,400. The car has an economic life of 5 years.
3.
The interest rate implicit in the lease is 10%.
4.
It is probable that Ravis will collect the lease payments.
5.
Equal annual lease payments are due at the end of each year.
Prepare a table summarizing the lease receipts and interest income earned by the Ravis Rent-A-Car for the 4-year lease term.
Additional Instructions
Ravis Rent-A-Car Company
Summary of Lease Payments Received and Interest Income Earned (by Interest Method)
1
Date
Annual Lease Payments Received
Interest Income at 10% on Lease Receivable
Reduction of Lease Receivable
Lease…
Ravis Rent-A-Car Company leases a car to Ira Reem, an employee, on January 1, 2019. The term of the noncancelable lease is 4 years. The following information about the lease is provided:
1.
Title to the car passes to Ira on the termination of the lease with no additional payment required by the lessee.
2.
The cost and fair value of the car is $8,400. The car has an economic life of 5 years.
3.
The interest rate implicit in the lease is 10%.
4.
It is probable that Ravis will collect the lease payments.
5.
Equal annual lease payments are due at the end of each year.
3a. Prepare the journal entries for 2019.
PAGE 2019
GENERAL JOURNAL
DATE
ACCOUNT TITLE
DEBIT
CREDIT
1
2
3
4
5
6
7
3b. Prepare the journal entries for 2020.
PAGE 2020
GENERAL JOURNAL
DATE
ACCOUNT TITLE
DEBIT…
1. Refer to Item 4. At what amount should the lease liability be recognized at January 1, 2022, after making the first payment of P260,000 to the lessor?
2. Assuming that the residual value of the two automobiles amounted to P150,000 at the end of the lease term, prepare the journal entry to record the transfer of the leased automobiles to the lessor.
Chapter 20 Solutions
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
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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