Vaibhav Kingbird Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to BlossomCompany. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. Thefollowing information relates to this agreement.1.2.3.4.Blossom has the option to purchase the equipment for $12,000 upon termination of the lease. It is notreasonably certain that Blossom will exercise this option.(a)The equipment has a cost of $100,000 and fair value of $120,000 to Kingbird Leasing. The useful economic lifeis 2 years, with a residual value of $12,000.Kingbird Leasing desires to earn a return of 6% on its investment.Collectibility of the payments by Kingbird Leasing is probable.Click here to view factor tables.Prepare the journal entries on the books of Kingbird Leasing to record the payments received under the lease andto recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Creditaccount titles are automatically indented when amount is entered. Do not indent manually. Listall debit entries before credit entries. If no entry is required, select "No Entry" for the accounttitles and enter 0 for the amounts. For calculation purposes, use 5 decimal places as displayed inthe factor table provided and round final answers to 0 decimal places e.g. 5,275.)Date+Account Titles and ExplanationDebitIII

Journal entry is an art of recording, summarizing and classifying the business transaction into…

Kingbird Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Blossom Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. 2. 3. Blossom has the option to purchase the equipment for $12,000 upon termination of the lease. It is not reasonably certain that Blossom will exercise this option. The equipment has a cost of $100,000 and fair value of $120,000 to Kingbird Leasing. The useful economic life is 2 years, with a residual value of $12,000. Kingbird Leasing desires to earn a return of 6% on its investment.

Kingbird Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Blossom Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. 2. 3. Blossom has the option to purchase the equipment for $12,000 upon termination of the lease. It is not reasonably certain that Blossom will exercise this option. The equipment has a cost of $100,000 and fair value of $120,000 to Kingbird Leasing. The useful economic life is 2 years, with a residual value of $12,000. Kingbird Leasing desires to earn a return of 6% on its investment.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

See similar textbooks

Similar questions

Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
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.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
Turner Company signs a lease agreement on January 1, 2024, to lease equipment to Holmgren Company. The term of the non-cancelable lease is 5 years, and annual payments are required at the beginning of each year. The following information relates to this agreement. -Holmgren has the option to purchase the equipment for $11,000 upon termination of the lease. It is reasonably certain that Holmgren will exercise this option (i.e. it is a bargain purchase). - The equipment has a cost of $118,000 and fair value of $186,000 to Turner. Its useful economic life is 10 years. What annual rental amount will Williamson charge if it desires to earn a return of 7% on its investment?
Sage Hill Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Oriole Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. 2. Oriole has the option to purchase the equipment for $22,500 upon termination of the lease. It is not reasonably certain that Oriole will exercise this option. The equipment has a cost of $250,000 and fair value of $273,000 to Sage Hill Leasing. The useful economic life is 2 years, with a residual value of $22,500. 3. 4. Sage Hill Leasing desires to earn a return of 5% on its investment. Collectibility of the payments by Sage Hill Leasing is probable. Click here to view factor tables. (a) Prepare the journal entries on the books of Sage Hill Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account…
1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 | 2 22 23 24 25 25 27 28 25 30332 38 34 35 35 21 18 19 Date 20 26 29 31 33 36 37 38 (The $18,000 option to purchase does not count as a bargain purchase, the expected residual value at the end of the lease term is also $18,000.) 39 40 (a) Computation of annual payments: 1/1/20 12/31/20 12/31/21 12/31/21 Skysong Leasing Company (Lessor) Lease Amortization Schedule Interest on Lease Receivable Annual Lease Payment Account Titles Recovery of Lease Receivable Debit 1 2 Credit 3 5 6 7 8 9 Lease 10 Receivable 11 189,000 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 |33 34 35 36 37 38 39 40
Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2020, to lease electronic equipment to Wai Corporation, which also uses IFRS 16. The term of the non-cancellable lease is two years and payments are required at the end of each year. The following information relates to this agreement. 1. Wai Corporation has the option to purchase the equipment for $12,800 upon the termination of the lease and this option is reasonably certain to be exercised. 2. The equipment has a cost and fair value of $180,000 to Oriole Leasing Corporation. The useful economic life is two years, with a residual value of $12,800. 3. Wai Corporation is required to pay $5,400 each year to the lessor for insurance costs. 4. Oriole Leasing Corporation wants to earn a return of 10% on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by the…
Shamrock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Pharoah Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Pharoah has the option to purchase the equipment for $23,000 upon termination of the lease. It is not reasonably certain that Pharoah will exercise this option. 2. The equipment has a cost of $260,000 and fair value of $290,000 to Shamrock Leasing. The useful economic life is 2 years, with a residual value of $23,000. 3. Shamrock Leasing desires to earn a return of 5% on its investment. 4. Collectibility of the payments by Shamrock Leasing is probable. Prepare the journal entries on the books of Shamrock Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. Assuming that Pharoah exercises its option to purchase the equipment on December 31,…
Shamrock Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Pharoah Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Pharoah has the option to purchase the equipment for $23,000 upon termination of the lease. It is not reasonably certain that Pharoah will exercise this option. 2. The equipment has a cost of $260,000 and fair value of $290,000 to Shamrock Leasing. The useful economic life is 2 years, with a residual value of $23,000. 3. Shamrock Leasing desires to earn a return of 5% on its investment. 4. Collectibility of the payments by Shamrock Leasing is probable. Click here to view factor tables. https://education.wiley.com/content/Kieso_Intermediate_Accounting_17e/media/simulations/interest_rate_tables.pdf (a) Prepare the journal entries on the books of Shamrock Leasing to reflect the…
Marin Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Cullumber Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Cullumber has the option to purchase the equipment for $27,000 upon termination of the lease. It is not reasonably certain that Cullumber will exercise this option.2. The equipment has a cost of $340,000 and fair value of $396,500 to Marin Leasing. The useful economic life is 2 years, with a residual value of $27,000.3. Marin Leasing desires to earn a return of 5% on its investment.4. Collectibility of the payments by Marin Leasing is probable. Prepare the journal entries on the books of Marin Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. Assuming that Cullumber exercises its option to purchase the equipment on December 31, 2021, prepare the journal…
Tamarisk Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment to Carla Vista Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Carla Vista has the option to purchase the equipment for $19,000 upon termination of the lease. It is not reasonably certain that Carla Vista will exercise this option. 2. The equipment has a cost of $180,000 and fair value of $233,500 to Tamarisk Leasing. The useful economic life is 2 years, with a residual value of $19,000. 3. Tamarisk Leasing desires to earn a return of 5% on its investment. 4. Collectibility of the payments by Tamarisk Leasing is probable. Click here to view factor tables. (a) Prepare the journal entries on the books of Tamarisk Leasing to reflect the payments received under the lease and to recognize income for the years 2020 and 2021. (Credit account…