1. Computing the Annual Lease Payments On January 1, 2020, Alpha Inc. leased equipment to Omega Company. Selected information for Alpha relating to the lease follows. Lease term 10 years (expected life of the equipment) Lease payments Due annually on January 1, beginning immediately on January 1, 2020 Lease liability $289,000 (at lease inception) Interest rate 10% Determine the annual lease payment charged by Alpha Inc. Round your answer to the nearest whole number.
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1. Computing the Annual Lease Payments
On January 1, 2020, Alpha Inc. leased equipment to Omega Company. Selected information for Alpha relating to the lease follows.
| Lease term | 10 years (expected life of the equipment) |
| Lease payments | Due annually on January 1, beginning immediately on January 1, 2020 |
| Lease liability | $289,000 (at lease inception) |
| Interest rate | 10% |
Determine the annual lease payment charged by Alpha Inc.
- Round your answer to the nearest whole number.
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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.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.
- 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).Use the information pertaining to Laura Leasing Company and Plote Company from E21.15. Assume that the expected residual value at the end of the lease is $10,000, such that the payments are $24,638.87. Instructions Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. In E21.15 Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $80,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. 4. The agreement requires equal annual…A finance lease agreement calls for quarterly lease payments of $5,133 over a 15-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $182,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required A Required B >
- ok nt ences A finance lease agreement calls for quarterly lease payments of $7,056 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $168,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required B >A finance lease agreement calls for quarterly lease payments of $7,728 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $184,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date Lease Payment Effective Interest Decrease in balance Outstanding balance July 1 July 1 October 1On 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
- Core Co. leased a piece of manufacturing equipment from E-So Co. with the following terms: Annual lease payment: $990,000 Term of lease: 5 years Interest rate: 4% Lease commences on January 1, 2023 Payments are made on December 31 of each year in the lease term For parts a and b: a. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as a finance lease. b. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as an operating lease. Operating Lease Finance Lease a. Finance lease: Date Jan. 1, 2023 Account To record the start of the finance lease. Dec. 31, 2023 To record the amortization of leased asset. Dec. 31, 2023 Dec. 31, 2024 Dec. 31, 2024 To record the lease payment. To record the amortization of leased asset. To record the lease payment. > > > > > > > > > > Debit Credit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Li Zi Company entered into a lease of building on January 1, 2020. The lease contract provided the following information: Lease term 10 years Estimated useful life of leased asset 12 years Annual rental payable at end of each year for the first 5 years 400,000 Annual rental payable at end of each year for the next first 5 years 550,000 Interest rate implicit in the lease 10% No purchase option nor transfer of title REQUIRED: Prepare table of amortization and journal entries for the entire lease term.The company signed a 3years lease on 1/8/2020, monthly payment is $5,000, the annual increase 2% on 1th of Aug every year. The discount rate is 4%. Please use excel to calculate the lease schedule of the right of use by month, and the dep of the lease. Accounting useful life for the leased premises if 3 years, the depreciation rate (straight-line) is 33.33%