Do not give answer in image Iceberg Company is in the business of leasing newsophisticated equipment. Such an equipment was delivered.to a lessee on January 1, 2011 under a direct financing leasewith the following provisions:Cost of equipmentAnnual rental payable at the end of yearUseful life and lease term3,390,000600,000Implicit interest ratePresent value of an ordinary annuity of 1 at 12% for 10 yearsPresent value of an ordinary annuity of 1 at 11% for 10 years10 years12%5.6505.889Iceberg Company incurred and paid initial direct costs ofP143,400 in negotiating and arranging the lease.The equipment will revert to Iceberg Company at the end ofthe lease.Required:1. Compute the total financial revenue to be recognizedover the lease term.2. Prepare all the entries on the books of Iceberg Companyfor 2011.

Note :- Dear student, As you asked 2 separate questions, as per…

Answered: Iceberg Company

Business

Accounting

Iceberg Company

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

AEI Company is in the business of leasing new sophisticated equipment. At the beginning of current year, an equipment was delivered to a lessee under a direct financing lease with the following provisions: Cost of equipment 3,390,000 Annual rental payable at the end of year 600,000 Useful life and lease term 10 years Implicit interest rate 12% Present value of an ordinary annuity of 1 at 12% for 10 years 5.650 Present value of an ordinary annuity of 1 at 11% for 10 years 5.889 The entity incurred and paid initial direct costs of P143,400 in negotiating and arranging the lease. The equipment will revert to AEI Company at the end of the lease. Required: 1. Compute the…
ABC Company is engaged in leasing equipment. An equipment was delivered to a lessee on December 31,2019 under a direct financing lease with the following terms and conditions: Cost of the equipment P 5,680,000 Residual value (unguaranteed) 300,000 Useful life and lease term 8 years Implicit interest rate 12% Present value of an annuity due of 1 at 12% for 8 years 5.56 Present value of 1 at 12% for 8 years 0.40 The annual rental is P 1,000,000 payable every December 31. The first payment is made on December 31,2019. The equipment will revert to the lessor upon lease expiration. How much is the interest revenue for the year ended December 31,2020?
Kobie Company leased an equipment to a lessee on January 2, 2020 undera direct financing lease with the following provisions - cost of equipmentP3,390,000; Annual rental payable at the end of the year P600,000; Usefullife and lease term, 10 years. Kobie Company incurred and paid P143,400 innegotiation and arranging the lease. The present value of an ordinaryannuity of 1 at 12% for 10 years is 5,650 and the present value of anordinary annuity of 1 at 11% for 10 years is 5.889. What is the total financialrevenue to be recognized over the lease term?
The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning ofeach year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term,guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 12% January 1, 2020 The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $65,500. The lessee uses the straight-line depreciation method for all equipment. Instructions(iii)Record the first year’s depreciation on Telsan Company’s books. (iv) Record interest expense and lease liability for Telsan Company for the year ending December 31, 2020. (v) Discuss the nature of this lease to Simmonds Leasing Company.
Autocar Company leased a machine to a lessee on January 2, 2020 under a direct financing lease with the following provisions - cost of machine $3,390,000; Annual rental payable at the end of the year $600,000; Useful life and lease term, 10 years. Autocar Company incurred and paid $143,400 in negotiation and arranging the lease. The present value of an ordinary annuity of 1 at 12% for 10 years is 5,650 and the present value of an ordinary annuity of 1 at 11% for 10 years is 5.889. What is the total financial revenue to be recognized over the lease term?
Camia Company is in the business of leasing new hi-tech equipment. All are classified as direct financing lease. At the end of the lease term, the equipment will revert to Camia Company. On January 1, 2021, an equipment was leased to another entity with the following information:Cost of equipment P 5,500,000Residual value – guaranteed 400,000Annual rental payable in advance 959,500Useful life and lease term 8 yearsFirst lease payment January 1, 2021 1. The interest implicit in the lease (rounded to the nearest percentage) is: 2. What is the carrying amount of the net lease receivable to be presented in the December 31, 2022 statement of financial position?
FABS Ltd acquired an item of equipment and entered into a non-cancellable lease agreement with MBC Equipment Ltd on 1 January 2019. The lease consists of the following: Date of inception: 1/1/19 Duration of lease: 5 years Life of leased asset: 6 years Lease payments (annual): $250,000 (annual) which includes $30,000 for maintenance and insurance costs per annum. Guaranteed residual value (Added to final payment): $70,000 Interest rate: 14% Required: Determine the present value of minimum lease rental payment. Prepare the journal entries for FABS (the Lessee) using the Net Method for the following Transfer of control Payment of annual payments for 2019 and 2020. In your own words, explain how do we account for service costs that are included within a contract to lease an asset? give narrations also answer step by step show…
On December 31, 2020, Olivia Inc. leased a machinery from Catriona Company. The cost of the machinery on Catriona’s books is P1,345,815. The terms of the lease contain the following:· Annual payment payable in advance on December 31 each year: 358,500· Lease term: 4 years· Useful life of machinery: 6 years· Estimated residual value of machinery: 225,000· Guaranteed residual value upon return: 112,500INCLUDED in the annual payment is the amount of P28,500 which represents payment of executory costs. First payment is made on commencement date. Implicit interest rate is 7%. On the lessee’s books, how much is the carrying amount of the right of use asset by December 31, 2021? a. 961,387 b. 1,105,708 c. 1,017,637 d. 989,512
On December 31, 2020, Akainu Company, a lessor, actually sold a machinery that it had been leasing under a sale type lease. On January 1, 2020 after receipt of the lease payment for the year, the following account balances were associated with lease: Gross lease receivable 5,850,000 Unearned interest income 1,000,000 The interest rate implicit in the lease is 10%. On December 31, 2020, Akainu Company actually sold the leased machinery to the lessee for P 3,250,000 cash. What is the carrying amount of the lease receivable on December 31, 2020? Show your solution.
The information below relates to a leasing arrangement between Simmonds Leasing Company and Telsan Company, a lessee. Inception date January 1, 2020 Lease term 6 years Annual lease payment due at the beginning ofeach year, beginning with January 1, 2020 $150,000 Fair value of asset at January 1, 2020 $760,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term,guaranteed by the lessee $65,500 Lessor’s implicit rate 10% Lessee’s incremental borrowing rate 12% January 1, 2020 The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $65,500. The lessee uses the straight-line depreciation method for all equipment. Instructions(i) What is the lease liability for Telsan Company? ii) Record the lease on Telsan Company’s books at the date of inception. (iii)Record the first year’s depreciation on Telsan Company’s books. (iv) Record interest expense and lease liability for Telsan Company for…
France Company is a dealer in equipment. At the beginning of current year, an equipment was leased to another entity Problem 14-15 (IAA) with the following provisions: Annual rental payable at the end of each year Lease term and useful life of machinery Cost of equipment Residual value-unguaranteed Implicit interest rate PV of an ordinary annuity of 1 at 12% for 5 periods PV of 1 at 12% for 5 periods 1,500,000 5 years 4,000,000 500,000 12% 3.60 0.57 At the end of the lease term the equipment will revert to the lessor. The entity incurred initial direct cost of P200,000 in finalizing the lease agreement. 1. What is the gross investment in the lease? a. 7,500,000 b. 8,000,000 c. 4,000,000 d. 4,500,000 2. What is the net investment in the lease? a. - 5,400,000 b. 5,685,000 c. 4,000,000 d. 3,500,000 3. What interest income should be reported for current year? a. 682,200 b. 648,000 c. 900,000 d. 960,000 4. What amount should be reported as gross profit on sale! a. 1,485,000 b. 1,685,000 c.…
On December 31, 2021, Take it Easy Co. Leased an equipment with a cost of P1,000,000 to DesperadoCo. for4years which is also the useful life of the asset. The lease agreement specificies equal annual paymentofP261,694 beginning on December 31, 2021. At the end of the lease term, the equipment will revert toTakeitEasy Co. A third party related to the lessee guarantees residual value of the equipment amountingtoP150,000.The rate implicit on the lease is 11%. 1. How much is the total interest income to be earned over the lease term?a. P46,775 c. P196,775b. P103,225 d. P1,172,9272. How much is the interst income in 2022?a. P24,597 c. P81,214b. P61,361 d. P110,000