Blossom Inc., which uses IFRS, manufactures an X-ray machine with an estimated life of 12 years and leases it to SNC Medical Centre for a period of 10 years. The machine's normal selling price is $343,349, and the lessee guarantees a residual value at the end of the lease term of $14,000. The medical centre will pay rent of $50,000 at the beginning of each year and all maintenance, insurance, and taxes. Blossom incurred costs of $205,000 in manufacturing the machine and $13,000 in negotiating and closing the lease. Blossom has determined that the collectibility of the lease payments is reasonably predictable, that there will be no additional costs incurred, and that its implicit interest rate is 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. F. Discuss how Blossom's would have determined the classification of the lease if the company were using ASPE for its financial reporting.
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- Cullumber Inc manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $505,456. and its guaranteed residual value at the end of the non- cancelable lease termis estimated to be $16,400. The hospital will pay rents of $61,100 at the beginning of each year. Cullumber incurred costs of $227,000 in manufacturing the machine and $13400 in legal fees directly related to the signing of the lease. Cullumber has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Discuss the nature of this lease in relation to the lessor. The nature of this lease in relation to the lessor is Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to 0 decimai places, eg. 5,275.) (1) Lease receivable at commencement of the lease (2) Sales price…Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $495,678, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Chambers Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000 What is the initial lease liability?Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $495,678, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Instructions a. Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. 1. Lease receivable at commencement of the lease. 2. Sales price. 3. Cost of sales. b. Prepare a 10-year lease amortization schedule for Amirante, the lessor. c. Prepare all of the lessor's journal entries for the first…
- Sunland Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Coronado Airlines for a period of 10 years. The normal selling price of the equipment is $291,687, and its unguaranteed residual value at the end of the lease term is estimated to be $20,800. Coronado will pay annual payments of $43,500 at the beginning of each year. Sunland incurred costs of $164,300 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Coronado Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to O decimal places eg. 58,971) The amount of the initial lease…Crane SA manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is R$594,813, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be R$18,000. The hospital will pay rents of R$72,000 at the beginning of each year. Crane incurred R$410,000 in manufacturing cost and R$14,200 in legal fees directly related to the signing of the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Click here to view factor tables. Discuss the nature of this lease in relation to the lessor. The nature of this lease in relation to the lessor is Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places, e.g. 5,275.) (1) (2) (3) Lease receivable at commencement of the…George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $299,140, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in sales commissions in closing the lease. George has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Instructions a. Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. 1. Lease receivable. 2. Sales price. 3. Cost of goods sold. b. Prepare a 10-year lease amortization schedule for George, the lessor. c. Prepare all of the lessor's journal entries for the first year.
- Burling Water Cooperative currently contracts the removal of small amounts of hydrogen sulfide from its well water using manganese dioxide filtration prior to the addition of chlorine and fluoride. Contract renewal for 5 years will cost $75,000 annually for the next 2 years and $100,000 in years 3, 4, and 5. Assume payment is made at the end of each contract year. Burling Coop can install the filtration equipment for $125,000 and perform the process for $50,000 per year. At a discount rate of 6% per year, does the contract service still save money?Crane Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Cheyenne Airlines for a period of 10 years. The normal selling price of the equipment is $252,640, and its unguaranteed residual value at the end of the lease term is estimated to be $21,300. Cheyenne will pay annual payments of $37,500 at the beginning of each year. Crane incurred costs of $173,900 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Cheyenne Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Your Answer Correct Answer (Used) Your answer is correct. Discuss the nature of this lease in relation to the lessee. This is a finance lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer…Canada M. manufactures special equipment with an estimated economic life of 12 years and leases it to Phranka for a period of 10 years commencing January 1, 2021. The unguaranteed residual value at the end of the lease term is estimated to be $15,000. Phranka will make annual payments of $25,000 at the beginning of each year and pay for all maintenance and insurance costs. Canada M. incurred costs of $105,000 in manufacturing the equipment but is looking to make a profit on the sale of equipment. In addition, Phranka incurred $7000 in costs tied to negotiating and closing the lease. Canada M. has determined that the collectability of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. Phranka has a borrowing rate of 8%. How should Canada M. classify this lease transaction? a. Classify as an operating lease. b. Classify as a capital, sales type lease. c. Classify as a capital, direct finance type lease.…
- Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final…Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor. This is a sales-type lease Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 5.275) (1) Lease receivable S (2) Sales price S (3) Cost of sales $