On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the following terms and provisions: • The lease is noncancelable and has a term of 10 years. • The lease does not contain a renewal or bargain purchase option. • The annual rentals are $4,050, payable at the beginning of each year. • Baltimore agrees to pay all executory costs directly to a third party. • The cost of the equipment to the lessor is $25,266.10. The fair value of the equipment is $26,800. • Amity incurs initial direct costs of $1,380.75. • The interest rate implicit in the lease is 12%. • Amity expects to collect all lease payments from Baltimore.
Q: Morgan leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company.…
A: The economic life of the asset= 6 years Lease term= 6 years The cost of the asset= $291000 The fair…
Q: Patsy Co. and Philip Inc. sign a lease agreement dated January 1, 2020. The lease agreement…
A: Fari value of leased Assets: Fair value of the leased asset = PV of annual lease payment + PV of…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: It will be classified as sale type finance lease transaction: a. The Lease term is for major part…
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: The question is based on the concept of Lease Accounting. As the lease term covers the major part of…
Q: On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year…
A: As per IFRS 16, The lease liability ia to be measured at commencement date. It is present value of…
Q: ncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of…
A: calculation of annual rentals Desired Rate of return = 10% Lease Term= 8 years Salvage value = 0…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: A lease is classified as Sale Type lease if the following conditions are satisfied, The lease terms…
Q: On January 1, 2021, Blossom, Inc. signs a 10-year noncancelable lease agreement to lease a storage…
A: A contract in which terms and conditions are mentioned at which one party agrees to pay a regular…
Q: On 1 January 2014, Lystra entered into a lease agreement with Trina to rent an asset for a 6 year…
A: You have posted a multi-part question, so as per our policy only the first three parts are answered.…
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: A lease is a type of agreement or a contract in which resources are given on lease and for which…
Q: Wells Leasing Company signs an agreement on January 1, 2020, to lease equipment to Manchester…
A: Given, Asset value= $250,000 Residual value= $25,000 Lease term = 6 years Interest rate = 6%
Q: On January 2, 2019, Chats leased an office space for an annual rental of P600,000 payable every…
A: Lease liability The firm opt for the lease system which are incurred the management of the capital…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: Year PV factor @ 12% Remarks 1 0.89286 = 1 / 1.12 2 0.79719…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Tamarisk Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment…
A: Journal entry: A journal entry is used to record day-to-day transactions of the business by debiting…
Q: On January 1, 2019, Carey Inc. entered into a noncancelable lease agreement, agreeing to pay $3,398…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Annual payment = $8,148 Borrowing rate = 10% PV Factor = 4.16987
Q: Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1,…
A: The question is based on the concept of Financial Accounting.
Q: On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: A lease is a written agreement that indicating the conditions within which a lessor acknowledges to…
Q: What portion of the P2,000,000 should be reported as current liability on December 31, 2019?
A: The determination of amount that should be reported as current liability on December 31, 2019 is…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: Current liabilities are those liabilities that need to be paid or settled within a short period of…
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: Lease is the contract between lessor and the lessee for use of assets which consists the conditions…
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: Journal entries: It is the duty of the accountant to record and summarize business economic and non…
Q: In 2019, Blue Trucking Company negotiated and closed a long-term lease contract for newly…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: An entity is a manufacturer of machinery. It uses lease agreements to sell its product, On January…
A: Solution: Amount of sales revenue should be recognized by entity = Present value lease payments +…
Q: eal Leasing Company agrees to lease equipment to Flint Corporation on January 1, 2020. The following…
A: Given, Term of lease is 7 years Machinery cost is $510,000 Fair value is $717,000 Residual value is…
Q: The lease is noncancelable and has a term of 8 years. • The annual rentals are $28,900, payable at…
A:
Q: Marin Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The…
A: Note:- Since the lessor's desired rate of return on its investment is missing in the question,…
Q: Marin Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The…
A: Upon Initial recognition, the lessee shall measure lease liability at lower of Fair Value of Asset…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: SOLUTION- MEANING OF LEASE = It is a Contractual Arrangement Calling for the Lessee(User) to pay the…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: The questions are multiple choice questions. Required Choose the Correct Option.
Q: n. Instructions: 1. Using the lease classification tests, determine the nature of this lease for the…
A: Journal: Journal is considered as a book of original entry because all the transactions that have…
Q: On December 31, 2019, Marin Corporation signed a 5-year, non-cancelable lease for a machine. The…
A: Lease payment- A lease payment is the correspondent of the monthly rent that is officially dictated…
Q: Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2020, to lease…
A: Annual lease payments refers to the annual rental amount that is being paid every year by the lessee…
Q: Blossom Leasing Company agrees to lease equipment to Blue Corporation on January 1, 2020. The…
A: Lease liability under a lease contract is the sum of the discounted values all the lease rentals…
Q: Assume that on December 31, 2019, Kirnberly-clark Corp. signs a 10-year, non-cancelable lease…
A: Lessor and Lessee agreements: A lease of immovable property is a transfer of a right to enjoy such…
Q: An entity is a manufacturer of machinery, It uses lease agreements to sell its product, On January…
A: Lease receivable = annual rental x present value factors of annuity due 8% for 5 periods +…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: The question is based on the concept of Lease Accounting in Financial Accounting.
Q: Wells Leasing Company signs an agreement on January 1, 2020, to lease equipment to Manchester…
A: The question is related to Accounting for Lease. The Present value of lease rent from standpoint…
Q: Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The…
A: Amount of the equal rental receipts = Amount recover through annual lease payments / Present value…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: It will be classified as sale type finance lease transaction: a. The Lease term is for major part…
Q: On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to…
A: CALCULATION OF INTEREST AMOUNT : BEGINNING OF YEAR ANNUAL LEASE PAYMENT INTEREST ON LEASE…
Q: Monty Leasing Company agrees to lease equipment to Flounder Corporation on January 1, 2020. The…
A: Leasing an asset or a resource means giving the asset on rent for regular payments.
Q: e lease is noncancelable and has a term of 8 years. • The annual rentals are $39,200, payable at the…
A: 1. Requirement 1 Lessor should classify the above lease as finance lease reason: 1. The lessee holds…
Q: Skysong enters into an agreement with Traveler Inc. to lease a car on December 31, 2019. The…
A: Prepare the journal entries:
Q: Scupper Farms, the lessee, and Tyrrell Equipment, the lessor, sign a lease agreement on January 1,…
A: 1.
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…
Q: On December 31, 2019, Splish Brothers Corporation signed a 5-year, non-cancelable lease for a…
A: Answer: As per given -
Q: Next Level Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the…
A: 1) The amount of equal rental receipt = Equipment cost / Annuity factory @ 10% for 8 years Annuity…
| • | The lease is noncancelable and has a term of 10 years. |
| • | The lease does not contain a renewal or bargain purchase option. |
| • | The annual rentals are $4,050, payable at the beginning of each year. |
| • | Baltimore agrees to pay all executory costs directly to a third party. |
| • | The cost of the equipment to the lessor is $25,266.10. The fair value of the equipment is $26,800. |
| • | Amity incurs initial direct costs of $1,380.75. |
| • | The interest rate implicit in the lease is 12%. |
| • | Amity expects to collect all lease payments from Baltimore. |
| • | Amity estimates that the fair value at the end of the lease term will be $3,160 and that the economic life of the crane is 12 years. This value is not guaranteed by Baltimore. |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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.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.Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line method
- Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.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.
- Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the following terms and provisions: • The lease is noncancelable and has a term of 10 years. • The lease does not contain a renewal or bargain purchase option. • The annual rentals are $3,870, payable at the beginning of each year. • Baltimore agrees to pay all executory costs directly to a third party. • The cost of the equipment to the lessor is $24,177.54. The fair value of the equipment is $25,700. • Amity incurs initial direct costs of $1,310.90. • The interest rate implicit in the lease is 12%. • Amity expects to collect all lease payments from Baltimore. • Amity estimates that the fair value at the end of the lease term will be $3,100 and that the economic life of the crane is 12 years. This value is not guaranteed by Baltimore. Required: Prepare the journal entries for Amity for 2019.
- On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the following terms and provisions: • The lease is noncancelable and has a term of 10 years. • The lease does not contain a renewal or bargain purchase option. • The annual rentals are $4,150, payable at the beginning of each year. • Baltimore agrees to pay all executory costs directly to a third party. • The cost of the equipment to the lessor is $25,836.57. The fair value of the equipment is $27,300. • Amity incurs initial direct costs of $1,427.00. • The interest rate implicit in the lease is 12%. • Amity expects to collect all lease payments from Baltimore. • Amity estimates that the fair value at the end of the lease term will be $3,110 and that the economic life of the crane is 12 years. This value is not guaranteed by Baltimore. Required: 1. Next Level What are initial direct costs? Discuss the accounting treatment of these costs. Are they treated in the same…On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the following terms and provisions: • The lease is noncancelable and has a term of 10 years. • The lease does not contain a renewal or bargain purchase option. • The annual rentals are $4,050, payable at the beginning of each year. • Baltimore agrees to pay all executory costs directly to a third party. • The cost of the equipment to the lessor is $25,173.36. The fair value of the equipment is $26,700. • Amity incurs initial direct costs of $1,370.46. • The interest rate implicit in the lease is 12%. • Amity expects to collect all lease payments from Baltimore. • Amity estimates that the fair value at the end of the lease term will be $2,840 and that the economic life of the crane is 12 years. This value is not guaranteed by Baltimore. Prepare the journal entries for Amity for 2019.Sheridan Company leases a building to Skysong, Inc. on January 1, 2020. The following facts pertain to the lease agreement. 1. The lease term is 5 years, with equal annual rental payments of $ 5,857 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $ 29,000, a book value to Sheridan of $ 22,000, and a useful life of 6 years. 4. At the end of the lease term, Sheridan and Skysong expect there to be an unguaranteed residual value of $ 5,500. 5. Sheridan wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Skysong was unaware of the implicit rate used in the lease by Sheridan and has an incremental borrowing rate of 9%. Click here to view factor tables.How would Sheridan (lessor) and Skysong (lessee) classify this lease? Sheridan would classify the lease as a…