Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter S, Problem 3E
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Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011.
Edison purchased the equipment from International Machines at a cost of $112,080.
Related Information:
2 years (8 quarterly periods)
$15,000 at the beginning of each period
2 years
$112,080
8%
Lease term
Quarterly rental payments
Economic life of asset
Fair value of asset
Implicit interest rate
(Also lessee's incremental borrowing rate)
Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the inception of the lease
through January 1, 2012. Edison's financial year ends December 31.
!
Required information
[The following information applies to the questions displayed below.]
On January 1 of this year, Google Corporation leased a package of high-speed servers by
signing a five-year finance lease. Lease payments of $300,000 are due at the end of each
year. Google uses the straight-line method to amortize leased assets and the effective
interest rate method to amortize lease liabilities. Assume that the appropriate annual
discount rate is 9 percent.
Prepare the journal entries to record the reduction of the lease asset and the lease liability on December 31,
Year 2.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first
account field. Round your answers to 2 decimal places.
1
No
Transaction
a.
× Answer is not complete.
General Journal
Debit
Credit
Lease liability
☑
300,000.00
Cash
300,000.00
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011.
Edison purchased the equipment from International Machines at a cost of $112,080.
Related Information:
2 years (8 quarterly periods)
$15,000 at the beginning of each period
2 years
$112,080
Lease term
Quarterly rental payments
Economic life of asset
Fair value of asset
8%
Implicit interest rate
(Also lessee's incremental borrowing rate)
Required:
Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the inception off
the lease through January 1, 2012. Depreciation is recorded at the end of each financial year (December 31) on a
straight-line basis.
Chapter S Solutions
Financial Accounting
Ch. S - Defining a Lessor Which of the following best...Ch. S - Prob. 2MCQCh. S - Prob. 3MCQCh. S - Prob. 4MCQCh. S - Prob. 5MCQCh. S - Prob. 6MCQCh. S - Prob. 1MECh. S - Prob. 2MECh. S - Prob. 3MECh. S - Prob. 4ME
Ch. S - Prob. 1ECh. S - Prob. 2ECh. S - Prob. 3ECh. S - Prob. 4ECh. S - Calculating a Deferred Tax Liability LOS-5 On...Ch. S - Prob. 6ECh. S - Prob. 7ECh. S - Prob. 8ECh. S - Prob. 9ECh. S - Prob. 10ECh. S - Converting Operating Leases to Capital Leases...Ch. S - Converting Operating Leases to Capital Leases...Ch. S - Computing Effective Tax Rates LOS-4 Below is...Ch. S - Prob. 4PCh. S - Prob. 5PCh. S - Prob. 6PCh. S - Analyzing Starbuckss Lease Disclosures The...Ch. S - Analyzing Disneys Income Tax Disclosures The...
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- Uramilabenarrow_forwardManufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2016. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: Lease term 2 years (8 quarterly periods) Quarterly lease payments $15,000 at Jan. 1, 2016, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter Economic life of asset 2 years Interest rate charged by the lessor 8% Required: Prepare a lease amortization schedule for the two-year term of the lease and appropriate entries for Manufacturers Southern from the beginning of the lease through December 31, 2016. The company’s fiscal year-end is December 31. Appropriate adjusting entries are recorded at the end of each quarter.arrow_forwardI want correct answerarrow_forward
- Godoarrow_forwardOn 1 October 2014, Fresh Company acquired an item of plant under a five-year lease agreement. At that date, the present value of the total lease payments was $25m. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $2m and annual rentals of $6m paid on 30 September each year for five years. What is the current liability of the lease in Fresh Company's statement of financial position as at 30 September 2015?arrow_forward2. On August 31, 2018, Simmons Inc. leased warehouse equipment from Covington Corp. The lease agreement calls for Simmons to make semiannual lease payments of $50,000 over a 7-year lease term, payable at August 31 and February 28, with the first payment on August 31, 2018. Simmons' incremental borrowing rate is 11%, the same rate Covington used to calculate lease payment amounts. Covington purchased the warehouse equipment at a cost of $700,000 on August 31, 2018 with an expected useful life of 10 years and no salvage value. The fiscal year for both Simmons and Covington ends on December 31. Required: a. What are the present value of the lease payments on August 31, 2018? b. Starting on August 31, 2018 prepare all journal entries related to the lease that Simmons would have to make through December 31, 2020. c. Starting on August 31, 2018 prepare all journal entries related to the lease that Covington would have to make through December 31, 2020. d. What amounts related to the lease…arrow_forward
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