Leasing AG agrees to lease equipment to Fat Choi Furniture on January 1, 2020. The following information relates to the lease agreement.(Assume the accounting period ends on December 31.)a) Calculate the amount of the annual rental payment required. b) Compute the value of the lease liability to Fat Choi Furniture. c) Prepare an 8-year lease amortization schedule for the lessee, Fat Choi Furniture. 1. The term of the lease is 8 years with no renewal option, and the machinery has an estimatedeconomic life of 9 years.2. The cost of the machinery is $1,312,500, and the fair value of the asset on January 1, 2020, is$1,750,000.3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residualvalue of $125,000. Fat Choi Furniture estimates that the expected residual value at the endof the lease term will be $100,000. Fat Choi Furniture amortizes all of its leased equipmenton a straight-line basis.4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020.5. The collectibility of the lease payments is probable.6. Fat Choi Furniture's incremental borrowing rate is 6%. Leasing AG desires a 5% rate ofreturn on its investments, and Fat Choi Furniture is aware of it. Both companies consider thelease as finance lease.

Leasing AG agrees to lease equipment to Fat Choi Furniture on January 1, 2020. The following information relates to the lease agreement. (Assume the accounting period ends on December 31.) a) Calculate the amount of the annual rental payment required. b) Compute the value of the lease liability to Fat Choi Furniture. c) Prepare an 8-year lease amortization schedule for the lessee, Fat Choi Furniture

Leasing AG agrees to lease equipment to Fat Choi Furniture on January 1, 2020. The following information relates to the lease agreement. (Assume the accounting period ends on December 31.) a) Calculate the amount of the annual rental payment required. b) Compute the value of the lease liability to Fat Choi Furniture. c) Prepare an 8-year lease amortization schedule for the lessee, Fat Choi Furniture

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 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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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?
Teal Mountain Company leased equipment from Costner Company, beginning on December 31, 2024. The lease term is 5 years and requires equal rental payments of $73,118 at the beginning of each year of the lease, starting on the commencement date (December 31, 2024). The equipment has a fair value at the commencement date of the lease of $310,000, an estimated useful life of 5 years, and no estimated residual value. The appropriate interest rate is 9%. Click here to view factor tables. Prepare Teal Mountain's 2024 and 2025 journal entries, assuming Teal Mountain depreciates similar equipment it owns on a straight- line basis. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal…
Assume that IBM leased equipment that was carried at a cost of $62,000 to Carla Vista Company. The term of the lease is 6 years beginning December 31, 2019, with equal rental payments of $18,427 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $92,001. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $92,001.Prepare IBM’s December 31, 2020, entry to record the lease transaction with Carla Vista Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit…
Linda Leasing Company signs an agreement on January 1, 2025, to lease equipment to Swifty Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. 3. The fair value of the asset at January 1, 2025, is $72,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $12,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $21,250.90 to the lessor, beginning on January 1, 2025. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Swifty uses the straight-line depreciation method for all equipment. Click here to view factor tables. Prepare all of the journal entries for the lessee for 2025 to record the lease agreement, the lease payments, and all expenses related to this lease.…
Debra Leasing Company signs an agreement on January 1, 2025, to lease equipment to Novak Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. 3. The fair value of the asset at January 1, 2025, is $94,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $11,000, none of which is guaranteed. 4. The agreement requires equal annual rental payments of $29,181.70 to the lessor, beginning on January 1, 2025. 5. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. 6. Novak uses the straight-line depreciation method for all equipment. Click here to view factor tables. Prepare all of the journal entries for the lessee for 2025 to record the lease agreement, the lease payments and all expenses related to this lease.…
Assume that IBM leased equipment that was carried at a cost of $92,000 to Carla Vista Company. The term of the lease is 6 years December 31, 2019, with equal rental payments of $18,427 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $92,001. The equipment has a useful life of 6 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $92,001.Prepare IBM’s December 31, 2020, entry to record the lease transaction with Carla Vista Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount…
Assume that IBM leased equipment that was carried at a cost of $173,000 to Oriole Company. The term of the lease is 7 years December 31, 2019, with equal rental payments of $30,767 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $172,999. The equipment has a useful life of 7 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $172,999. Prepare IBM’s December 31, 2020, entry to record the lease transaction with Oriole Company.
Assume that IBM leased equipment that was carried at a cost of $67,000 to Crane Company. The term of the lease is 5 years beginning December 31, 2019, with equal rental payments of $22,879 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $97,001. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $97,001. Prepare IBM’s December 31, 2020, entry to record the lease transaction with Crane Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount…
Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…
Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of the lease is 5 years beginning December 31, 2024, with equal rental payments of $30,200 beginning December 31, 2024. The fair value of the equipment at commencement of the lease is $128,040. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Prepare IBM's December 31, 2024, journal entries at commencement of the lease. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view…
Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $30,044 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $127,378. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable.Prepare IBM’s December 31, 2019, journal entries at commencement of the lease. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 enter an account title To record the lease enter a debit…
4..new Bonita Leasing Company agrees to lease equipment to Windsor Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $559,000, and the fair value of the asset on January 1, 2020, is $724,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Windsor estimates that the expected residual value at the end of the lease term will be 60,000. Windsor amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Bonita desires a 10% rate of return on its investments. Windsor’s incremental borrowing rate is 11%, and the lessor’s implicit rate is unknown.…