1, 2024, Botosan... On January 1, 2024, Botosan Corporation leased equipment under a finance lease designed to earn the lessor a 8% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $273,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $31,000 per year. Insurance premiums of $20,000 annually are related to the equipment. The lease agreement specified that both amounts were to be paid by the lessor and the lease payments reflect both expenditures. At what amount will Botosan record a right-of-use asset? Note: Round your answer to the nearest whole dollar amount.

1, 2024, Botosan... On January 1, 2024, Botosan Corporation leased equipment under a finance lease designed to earn the lessor a 8% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $273,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $31,000 per year. Insurance premiums of $20,000 annually are related to the equipment. The lease agreement specified that both amounts were to be paid by the lessor and the lease payments reflect both expenditures. At what amount will Botosan record a right-of-use asset? Note: Round your answer to the nearest whole dollar amount.

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 6E: Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on...

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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.
Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)
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.
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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.
On January 1, 2018, Jasperse Corporation leased equipment under a finance lease designed to earn the lessora 12% rate of return for providing long-term financing. The lease agreement specified ten annual payments of$75,000 beginning January 1, and each December 31 thereafter through 2026. A 10-year service agreement wasscheduled to provide maintenance of the equipment as required for a fee of $5,000 per year. Insurance premiumsof $4,000 annually are related to the equipment. Both amounts were to be paid by the lessor and lease paymentsreflect both expenditures. At what amount will Jasperse record a right-of-use asset?
On January 1, 2021, Gemini Corporation leased equipment under a finance lease designed to earn the lessor a 6% rate of return for providing long-term financing. The lease agreement specified ten annual payments of $234,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $18,000 per year. Insurance premiums of $13,500 annually are related to the equipment. Both amounts were to be paid by the lessor and the lease payments reflect both expenditures. At what amount will Gemini record a right-of-use asset? (Round your answer to the nearest whole dollar amount.) O $1,404,305 O $1,685,166 O $1,825,596 O $1,544,735
5 On January 1, 2024, Botosan Corporation leased equipment under a finance lease designed to earn the lessor a 11% rate of return for providing long- term financing. The lease agreement specified ten annual payments of $246,000 beginning January 1, and each December 31 thereafter through 2029. A 10-year service agreement was scheduled to provide maintenance of the equipment as required for a fee of $22,000 per year. Insurance premiums of $15,500 annually are related to the equipment. The lease agreement specified that both amounts were to be paid by the lessor and the lease payments reflect both expenditures. At what amount will Botosan record a right-of-use asset? Note: Round your answer to the nearest whole dollar amount. 01:20:13 Multiple Choice O $1,176,669 O $1,320,484 O $1,464,299 O $1,608,114
2. On June 30, 2021, Marketplace Company leased a machine from Air Leasing. The contract requires Marketplace to make semiannual lease payments of $229,400 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Marketplace’s incremental borrowing rate is 12%, the same rate used to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. Air constructed the machine at a cost of $1,259,000. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:1. Determine the price at which Air is “selling” the machine (present value of the lease payments) at June 30, 2021.2. What would be the amounts related to the lease that Air would report in its balance sheet at December 31, 2021? (Ignore taxes.)3. What would be the amounts related to the lease that Air would report in its income statement for the year ended…
On January 1, 2024, Gravel Incorporated leased construction equipment from Rocky Mountain Leasing. Rocky Mountain Leasing purchased the equipment from Bishop Incorporated at a cost of $2,069,621. Gravel's borrowing rate for similar transactions is 10%. The lease agreement specified four annual payments of $432,000 beginning January 1, 2024, the beginning of the lease, and at each December 31 thereafter through 2026. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $1,506,319. On January 1, 2026 (after two years and three payments), Gravel and Rocky Mountain agreed to extend the lease term by two years. The market rate of interest at that time was 9%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the appropriate journal entries for Gravel Incorporated on January 1, 2026, to adjust its lease liability for the…
On January 1, 2024, QuickStream Communications leased telephone equipmen for Digium, Incorporated Digium's cash selling price for the equipment is $1,987,838. The lease agreement specifies six annual payments of $430,000 beginning December 31, 2024, and on each December 31 thereafter through 2029. The six-year lease is equal to the estimated useful life of the equipment. the contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 2%. The CPI at the beginning of the lease is 100. Digium routinely leases equipment to other firms. the interest rate in these lease arrangements is 8%. Note: Use tables, Excel, or a financial calculator. (FVof $1, PV of $1, FVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2024.
On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $530,203 over a four-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 12%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $3.49 million. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2024 (ignore taxes)? 3. What amount related to the lease would…