Company is leasing production equipment where the estimated useful life of the equipment is 11 years, and the lease term is 8 years. As per the current market, the fair value of the equipment is $14 million, while the lease rentals are agreed to be $2.45 million payable at the beginning of each year. If an appropriate discount rate is 12.25%, determine the nature of lease.
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- Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 11,500 Year 2: $ 16,500 Year 3: $ 21,500 Year 4: $ 26,500 An appropriate discount rate is 7 percentage, yielding a present value of $62,927.a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? a-2. If the lease is an operating lease, what will be the initial value of the lease liability? a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1? a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)
- The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1 : $18,000 Year 2: $23,000 Year 3: $28,000 Year 4: $33,000 An appropriate discount rate is 7%, yielding a present value of $84,943. If the lease is an operating lease, what will be the initial value of the right-of-use asset?Lessee enters into a three year lease of equipment and agrees to make the following annual payments at the end of each year 10,000 in year one, 12,000 in year two and 14,000 in year three. Discount rate is approx. 4, 235% and right of use asset is depreciated on a straight line basis over the lease term. What is the value of the lease liability at the end of years 2 & 3?The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 18,500 Year 2: $ 23,500 Year 3: $ 28,500 Year 4: $ 33,500 An appropriate discount rate is 7 percentage, yielding a present value of $86,637. b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1? (Round your answer to the nearest dollar amount.) b-5. If the lease is a finance lease, what will be the amortization expense shown on the income statement at the end of year 1? (Round your answer to…
- The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: $ 11,500 Year 2: $ 16,500 Year 3: $ 21,500 Year 4: $ 26,500 An appropriate discount rate is 7 percentage, yielding a present value of $62,927. a-5. If the lease is an operating lease, what will be the amortization expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-1. If the lease is a finance lease, what will be the initial value of the right-of-use asset? b-2. If the lease is a finance lease, what will be the initial value of the lease liability? b-3. If the lease is a finance lease, what will be the lease expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.) b-4. If the lease is a finance lease, what will be the interest expense shown on the income statement at the end of year 1?…Lagace Ltd. entered into a lease on June 1, 2020. The lease term is six years and requires annual rental payments of $30,000 at the beginning of each year. Lagace’s incremental borrowing rate is 8% and the rate implicit in the lease is 9%. (a) Calculate the capitalized amount of the right-to-use asset if Lagace follows IFRS 16. (b) Calculate the capitalized amount of the leased asset if Lagace follows ASPE. Show calculations using any of the following methods: (1) factor A.5, (2) a financial calculator, or (3) Excel function PV. Round final answers to the nearest cent.At the beginning of the year, Cazenovia, Inc. entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for 5 years at year-end.The implicit interest rate is 5% and the company classified the lease as a finance lease. What is the total expense if straight-line amortization is used for the leased asset?Round answer to the nearest whole number.$
- A lease agreement calls for annual payments of $56,979 over a 6-year period (also the asset's useful life). The lease is signed January 1, 20X1 with the first payment due on that date. The interest rate is 8%, and the PV of lease payments is $284,480. The lessor manufactured the asset at a cost of $270,000. 24. In year 20X1, the lease decreases the lessee's net income by 25. In year 20X1, the lease increases the lessor's net income by,The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: $15,500 $20,500 $25,500 $30,500 An appropriate discount rate is 7 percentage, yielding a present value of $76,475. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will be the initial value of the lease liability? Initial value of the lease liabilityKing Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $52,538 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $230,000 to produce. Required:1. Determine the price at which the lessor is “selling” the asset (present value of the lease payments).2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?