On January 1, 2010, Kerr Company leased a machine to Wee Company for six years requiring payments of P100,000 at the beginning of each year. The machine cost P480,000, which is the fair value at the lease date, and has a useful life of eight years with no residual value. Kerr’s implicit interest rate is 10% and present value factors are as follows: Present value of an annuity due of 1 at 10% for 6 periods-4.791 Present value of an annuity due of 1 at 10% for 8 periods-5.868 Kerr appropriately recorded the lease as a direct financing lease. At the inception of the lease, the gross lease receivable account balance should be a. 600,000 b. 586,800 c. 480,000 d. 479,100

On January 1, 2010, Kerr Company leased a machine to Wee Company for six years requiring payments of P100,000 at the beginning of each year. The machine cost P480,000, which is the fair value at the lease date, and has a useful life of eight years with no residual value. Kerr’s implicit interest rate is 10% and present value factors are as follows: Present value of an annuity due of 1 at 10% for 6 periods-4.791 Present value of an annuity due of 1 at 10% for 8 periods-5.868 Kerr appropriately recorded the lease as a direct financing lease. At the inception of the lease, the gross lease receivable account balance should be a. 600,000 b. 586,800 c. 480,000 d. 479,100

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
1. On August 1, 2021, DASHER Company leased a machine to SANTA Company for a 6-year period requiring payments of P100,000 at the end of each year. The machine cost P480,000, with an economic life of eight years and no residual value. DASHER's implicit interest rate is 10% and present value factors are as follows: Present value of annuity due of P1 at 10% for 6 periods – 4.791; Present value of an annuity of P1 at 10% for 8 periods – 5.868. DASHER recorded the lease as a direct financing lease. At the inception of the lease, how much should the gross lease receivable account balance be? *
On January 1, 2020, Tamia & Co, sold a machinery and immediately leases it back for a period of 4 years. Remaining useful life of the machinery is 10 years. Selling price is P3,000,000. Carrying amount of the machinery is P2,250,000. Annual rental is P400,000 payable every December 31, starting December 31, 2020. Implicit rate is 10% and PV factor for ordinary annuity at 10% for 4 periods is 3.169865. If the fair value of the sold and leased asset is P3,200,000, what amount of gain/loss related to the right transferred shall be recognized by the seller-lessee? a. Zero b. 950,000 c. 435,796 d. 514,204
On September 1, 2021, Confused Company purchased a machine. The purchase agreement required Confuse to pay an initial fee payment of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2021. The market interest rate is 12%. The present and future value tables at 4% for four (4) periods were as follows: Present value of P 1, 0.85; Present value of an ordinary annuity of P1, 3.63; Future value of P 1, 1.17, Future value of an ordinary annuity of P1, 4.25. What is the fair value of the note on December 31, 2021?
On January 1, 2020, Mya & Co, sold a machinery and immediately leases it back for a period of 4 years. Remaining useful life of the machinery is 10 years. Selling price is P3,000,000. Carrying amount of the machinery is P2,250,000. Annual rental is P400,000 payable every December 31, starting December 31, 2020. Implicit rate is 10% and PV factor for ordinary annuity at 10% for 4 periods is 3.169865. If the fair value of the sold and leased asset is P2,800,000, what amount of gain/loss related to the right transferred shall be recognized by the seller-lessee? a. 340,225 b. 209,775 c. 550,000 d. None
On January 1, 2020, sold a machinery and immediately leases it back for a period of 4 years. Remaining useful life of the machinery is 10 years. Selling price is P3,000,000. Carrying amount of the machinery is P2,250,000. Annual rental is P400,000 payable every December 31, starting December 31, 2020. Implicit rate is 10% and PV factor for ordinary annuity at 10% for 4 periods is 3.169865. If the fair value of the sold and leased asset is P3,200,000, what amount of gain/loss related to the right transferred shall be recognized by the seller-lessee?
Kirk Company purchased equipment by making a down payment of P400, 000 and issuing a note payable for P1, 800,000. A payment of P600, 000 is to be made at the end each year for three years. Theapplicable rate of interest is 8%. The present value of an ordinary annuity of 1 for three years at 8% is2.58, and the present value for the future amount of a single sum for three years at 8% is .735. Shippingcharges for the equipment of P200, 000 and installation charges of P350, 000 were incurred. What is thecapitalized cost of the equipment?
At the beginning of the current year, Ashe Company entered into a ten-year noncancelable lease requiring year-end payments ofP1,000,000. Ashe’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Ashe, is 10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10% and 5.650 at 12%. On the same date, Ashe Company paid the initial direct cost of P200,000 to negotiate and secure the leasing agreement. Ownership of the property remains to the lessor at the expiration of the lease. The leased property has an estimated economic life of 12 years. 1. What amount should be capitalized as cost of the Right to Use Asset?a. 6,145,000b. 6,345,000c. 5,650,000d. 5,850,000 2. What is the depreciation for the current year?a. 614,500b. 634,500c. 528,750d. 565,000 3. What is the lease liability at the end of the current year?a. 5,328,000b. 5,552,000c. 5,759,500d. 5,979,500
(Unknown Rate) LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in 2 years. Assuming annual compounding of interest, what rate of interest is being paid on the loan?
Pepe has been signed a contract to lease a machine at P150,000 per year with an annual increase of P10,500 for 10 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate is 2.5%. What lump sum paid today would be equivalent to the 10-year lease-payment plan?
KNL and Sons has been offered a loan of K500, 000 at 20% annual interest. They have opted to pay it in 24 months on a quarterly basis. Prepare an amortization schedule to show how the loan will be amortized at the end of each period. (20 marks)