On January 1, 2021, Entity A leases out an equipment to Entity B. Information on the lease is as follows: Lease term - 3 years; Gross Investment in the lease is 502,500; Interest rate implicit in the lease is 10%. The lease provides for the transfer of ownership of the equipment to the lessess at the end of the lease term. The PV of ordinary annuity of P1 @ 10%, n=3 is 2.48685. What is the amount of fixed lease payments? *

On January 1, 2021, Entity A leases out an equipment to Entity B. Information on the lease is as follows: Lease term - 3 years; Gross Investment in the lease is 502,500; Interest rate implicit in the lease is 10%. The lease provides for the transfer of ownership of the equipment to the lessess at the end of the lease term. The PV of ordinary annuity of P1 @ 10%, n=3 is 2.48685. What is the amount of fixed lease payments? *

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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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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.
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 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).
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, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information on the lease is as follows: Cost of equipment - P320,183 Useful life of equipment - 5 years Lease term - 4 years Annual rental payable at the beginning of each year? Company A incurred initial direct costs of P20,000 in negotiating the lease. The implicit interest rate is 12%. How much is the annual rent?
On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. What total amount of finance income will Entity Y recognize over the lease term?
An entity leased a machinery with useful life of 4 years on January 1, 2020 for period of 5 years with fixed annual rental of P150,000which is to be paid at the end of each year. The lease contract provides that the leased asset will be transferred to the lessee at theend of the lease term. The implicit interest rate in the lease is 10%. REQUIRED: Prepare table of amortization and journal entries forthe entire lease term.
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.
On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of S16,000 per year for 4 years. The expected life of the truck is 5 years, and the first payment will be made immediately. Flackmon could obtain a loan for a similar amount at a rate of 8% per year. Required: A. Record the lease liability and the first payment on January 1, 2021. B. Record the amortization on the leased asset for 2021. C. Record interest for 2021 on the lease. D. Record the lease payment on January 1, 2022. Your answers to this open-ended assignment should be placed in the space below this line. A Date Account Name Debit Credit Jan. 1, 2021 1-Jan-21 B Date Account Name Debit Credit Dec. 31, 2021 C Date Account Name Debit Credit Dec. 31, 2021 D Date Account Name Debit Credit Jan. 1, 2022
On January 1, 20x1, Entity Y leases out an equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. How much is the gross investment on January 1, 20x1? Select the correct response: O 300,000 500,000 200,000 400,000
On January 1, 2020, an entity leased an equipment for four years at anannual rental of P170,000 payable at the end of each year. The estimateduseful life of the equipment is four years. The present value factor of anordinary annuity of 1 for four years of an implicit rate of 12% is 3.0373. Thelease provides for a transfer of ownership of the equipment to the lesseeat the end of the lease term. Compute for the depreciation expense forthe right of use of asset for the year ended December 31, 2020.
on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease acquired gee to pay 100,000 annually, beginning december 31, 2021 and continuingfor 30 years. on january 1, 2021, the present value of the lease payments is 1,125,000 at 8% interest rate implicit in the lease. initial direct costs amount to 50,000. What is the carrying value of the right of use asset on December 31, 2021? ₱ 1,135,833 ₱ 1,125,000 ₱ 1,087,500 ₱ 1,175,000