1. What amount should be recorded initially as cost of the right of use asset?2. What is the annual depreciation of the right of use asset? Robbin Company leased a machine with remaining useful life of 14 years from Ready LeasingCompany. The lease required 10 annual payments of P1,000,000 beginning immediately.The lease specified an interest rate of 12% and a purchase option of P1,000,000 at the end ofthe tenth year. The lessee is reasonably certain to exercise the purchase option.Present value of an annuity due (in advance) of 1 at 12% for 10 periodsPresent value of 1 at 12% for 10 periods6.3280.322

Sometimes company gets the asset on lease means the ownership of the asset remains with the actual…

Answered: 1. What amount should be recorded…

1. What amount should be recorded initially as cost of the right of use asset? 2. What is the annual depreciation of the right of use asset?

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
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, 20X0, an entity leased an equipment for four years at an annual rental of $170,000 payable at the end of each year. The estimated useful life of the equipment is four years. The present value factor of an ordinary annuity of 1 for four years of an implicit rate of 12% is 3.0373. The lease provides for a transfer of ownership of the equipment to the lessee at the end of the lease term. Compute for the depreciation expense for the right of use of asset for the year ended December 31, 20x0.
An asset with a cost of $80,000 is leased on 1/1/x1. The lease is a sales-type lease for the lessor. Six annual lease payments are due on December 31 beginning on 12/31/x1. The asset will have no residual value. The lessor sets a rate of return of 8% and charges the lessee annual lease payments of $20,550. Present value factor of an ordinary annuity for six years at 8% 4.62288 Present value factor of an annuity due for six years at 8% 4.99271 Present value factor of a single sum for a six-year term at 8% .63017 In the journal entry at the inception of the lease under the gross method, what amount does the lessor credit to unearned interest? Group of answer choices A. $28,300 D. $43,300 B. $95,000 C. $123,300
Lessee enters into a three year lease of equipment and agrees to make the following annual payments at the end of each year 10,000 in year one, 12,000 in year two and 14,000 in year three. Discount rate is approx. 4, 235% and right of use asset is depreciated on a straight line basis over the lease term. What is the value of the lease liability at the end of years 2 & 3?
Lazy Company leased an equipment with useful life of 6 years on January 1, 2020 for period of 5 years with fixed annual rental of P600,000 which is to be paid at the end of each year. The lease contract provides that the lessee has guaranteed a P100,000 residual value of the leased asset. The implicit interest rate in the lease is 10%. REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
At the beginning of the current year, CPA Co, leased a machine to CMA Co. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual payments of P1,750,000 are made each December 31. The machine reverts to lessor at the end of the lease term, at which the residual value of the machine will be P275,000 which is unguaranteed.Required: Write answer without peso sign withcommas.What is the total financial revenue?
At the beginning of the year, Cazenovia, Inc. entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for 5 years at year-end.The implicit interest rate is 5% and the company classified the lease as a finance lease. What is the total expense if straight-line amortization is used for the leased asset?Round answer to the nearest whole number.$
Lessor CBA, Inc. leased a machine to lessee DF Co. The lease is noncancelable and requires DF to pay $6,000 per year, payable in advance, over a four-year period. CBA’s implicit interest rate (known to DF) is 6 percent. The lease term begins on January 1, 2020. The machine’s economic life is 7 years. The machine's book value is $26,000 and fair value $30,000, with a guaranteed residual value of $10,000. The collectability of the lease payments is probable for the lessor. (Note: Present value of an ordinary annuity of 1 for 4 periods at 6% is 3.46511, of an annuity due of 1 for 4 periods at 6% is 3.67301. Present value of 1 for 4 periods at 6% is 0.79209). Notes: Read carefully and follow strictly so that Bb can grade you correctly! 1. Use comma in numbers, one thousand is 1,000, not 1000. No $ sign. No positive or negative sign. 2. If no entry is required, write N/A. 3. Only use the following accounts: ROU asset, Lease liability, Depreciation expense, Interest expense, Cash, CGS,…
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.
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a six-year lease term (also the asset's useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $235,000. (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: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization table through the second payment on January 1, 2017. c. What would be the increase in earnings that the lessor would report in its income statement for the year ended December 31, 2016 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required A Required B Required C What would be the increase in earnings that the lessor would report in its…
On January 1, 20x1, Row Co. leased a machine from Boat, Inc. Information on the lease is as follows: Annual rent payable at the beginning of each year P200,000 10 years 12 years Lease term Useful life of machine Implicit interest rate 10% The lease contract provides Row Co. an option to purchase the machine at the end of the lease term for P100,000. The option price approximates the machine's expected fair value at the end of the lease. Row Co. is reasonably certain to the exercise the option. What amount of interest expense should Row Co. recognize on the lease in 20x1? а. 139,036 b. 135,181 c. 119,036 d. 115,181