Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 20, Problem 6C
1 (a)
To determine
Identify the type of lease and explain the reasons for such classification.
1 (b)
To determine
Explain the way that Village C computes the appropriate amount to record the lease or asset acquired.
1 (c)
To determine
Identify the accounts that will be credited or affected by the given lease transaction and explain the way the lease, or asset, or other cost be matched with the earnings.
2 (a)
To determine
Identify the type of lease and explain the reasons for such classification.
2 (b)
To determine
Explain the way that Company T computes the appropriate amount to record the lease or asset acquired.
2 (c)
To determine
Explain the manner in which Company T compute the appropriate amount of earnings to be recognized from each lease payment.
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Rachel Company used leases as a method of selling products. In the current year, Rachel Company completed construction of a construction equipment. At the beginning of the current year, the construction equipment was leased on a contract specifying that ownership of thereon will transfer to the lessee at the end of the lease period. The annual lease payments do not include executory costs. Original cost of the construction equipment is P9,000,000. Lease payments payable at beginning of each year is P2,000,000. Estimated residual value is P1,000,000. Implicit interest rate is 12%, 10-year lease term. Present value of an annuity due of 1 at 12% for 10 periods is 6.33 and PV of 1 at 12% for 10 periods is 0.32.
1. What amount should be reported as gross profit on sale?
2. How much is the interest income for the current year?
Superfast Company used leases as a method of selling its products. In 2018, the company completed construction of a jet plane. On January 1, 2018, the jet plane was leased to Jett W. on a contract specifying that ownership of the jet will transfer to the lessee at the end of the lease period. Cost of the jet plane 800,000 Fair value of the jet plane at commencement of lease 1,300,000 Lease payments payable in advance 150,000 Estimated residual value 200,000 Implicit interest rate 12% Date of first lease payment January 1, 2018 Lease term 20 years PV of an annuity due of 1 at 12% for 20 periods 8.37 PV of an ordinary annuity of 1 at 12% for 20 periods 7.47 PV of 1 at 12% for 20 periods 0.10
Problem 1. What is the total interest that the company will earn over the lease term?
A. 1,744,500
B. 1,924,500
C. 1,944,500
D. 2,200,000
Problem 2. What is the total income derived by the company from the lease for the year 2018?
A. 455,500
B. 588,160
C. 606,160
D. 608,160
Marianas Company adopted the policy of leasing as the
primary method of selling products. The entity's main
constructed such a cargo vessel for Jade Company at a cost
product is a small cargo vessel. Marianas Company
It is estimated that the cargo vessel will have a residual
of P2,500,000 to be paid over 10 years with the ownership
transferring to Jade Company at the end of the lease period
The terms of the lease provided for annual advance paymenta
Problem 14-17 (IAA)
of P8,500,000.
value of P1,600,000 at that date.
The lease payments began at the beginning of current year
Marianas Company incurred initial direct cost of P500.000
in financing the lease agreement with Jade Company. The
sale price of the cargo vessel is P14,875,000.
Financing the construction was at a 14% rate. The present
value of an annuity due of 1 at 14% for 10 periods is 5.95.
1. What amount should be reported as gross profit on sale
for the current year?
a. 5,875,000
b. 6,375,000
c. 4,275,000
d. 4,775,000
2. What…
Chapter 20 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 20 - Prob. 1GICh. 20 - List four potential benefits to the lessor of...Ch. 20 - Prob. 3GICh. 20 - What is a substitution right, and when does that...Ch. 20 - Prob. 5GICh. 20 - List the five criteria used to determine if a...Ch. 20 - Prob. 7GICh. 20 - Prob. 8GICh. 20 - Describe briefly the procedures followed by the...Ch. 20 - Owens Company leased equipment for 4 years at...
Ch. 20 - Describe the difference between how a lessee would...Ch. 20 - Prob. 12GICh. 20 - What is the basic difference between the...Ch. 20 - Why are compound interest concepts appropriate and...Ch. 20 - Describe briefly the accounting procedures...Ch. 20 - Prob. 16GICh. 20 - Prob. 17GICh. 20 - Which of the following should be included by the...Ch. 20 - East Company leased a new machine from North...Ch. 20 - Prob. 3MCCh. 20 - Fox Company, a dealer in machinery and equipment,...Ch. 20 - Fox Company, a dealer in machinery and equipment,...Ch. 20 - In the third year of a 6-year finance lease, the...Ch. 20 - Prob. 7MCCh. 20 - At its inception, the lease term of Lease G is 65%...Ch. 20 - Rent received in advance by the lessor for an...Ch. 20 - On August 1, 2019, Kern Company leased a machine...Ch. 20 - Next Level Keller Corporation (the lessee) entered...Ch. 20 - Use the information in RE20-1. Prepare the journal...Ch. 20 - Next Level Garvey Company (the lessee) entered...Ch. 20 - Use the information in RE20-3. Prepare the journal...Ch. 20 - Use the information in RE20-3. Prepare the journal...Ch. 20 - Montevallo Corporation leased equipment from Folio...Ch. 20 - Use the information in RE20-6. However, assume...Ch. 20 - Use the following information to decide whether...Ch. 20 - Use the information in RE20-3. Prepare the journal...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Lessee Accounting with Payments Made at Beginning...Ch. 20 - Lessee Accounting Issues Sax Company signs a lease...Ch. 20 - Lessee Accounting for Finance Lease On January 1,...Ch. 20 - Prob. 5ECh. 20 - Lessor Accounting Issues Ramsey Company leases...Ch. 20 - Lessor Accounting with Receipts at End of Year...Ch. 20 - Lessor Accounting with Unguaranteed Residual Value...Ch. 20 - Lessor Accounting with Guaranteed Residual Value...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Guaranteed and Unguaranteed Residual Values...Ch. 20 - Lessor Accounting Issues Rexon Company leases...Ch. 20 - Lessee and Lessor Accounting Issues Diego Leasing...Ch. 20 - Lessee and Lessor Accounting Issues The following...Ch. 20 - Lease Income and Expense Reuben Company retires a...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Determining Type of Lease and Subsequent...Ch. 20 - Accounting for Leases by Lessee and Lessor Scupper...Ch. 20 - Lessee Accounting Issues Timmer Company signs a...Ch. 20 - Sales-Type Lease with Guaranteed Residual Value...Ch. 20 - Sales-Type Lease with Unguaranteed Residual Value...Ch. 20 - Sales-Type Lease with Receipts at End of Year...Ch. 20 - Initial Direct Costs and Related Issues On January...Ch. 20 - Various Lease Issues for Lessor and Lessee Lessee...Ch. 20 - Prob. 10PCh. 20 - Various Lease Issues Farrington Company leases a...Ch. 20 - Comprehensive Landlord Company and Tenant Company...Ch. 20 - Prob. 1CCh. 20 - Identified Asset A customer enters into a 3-year...Ch. 20 - Prob. 3CCh. 20 - Types of Leases On January 1, Hazard Company, a...Ch. 20 - Initial Direct Costs Efland Company leases...Ch. 20 - Prob. 6C
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