ABC Company leases a machinery from XYZ Company under a twelve-month operating lease. As an inducement to enter the lease, XYZ Company grants ABC free rent for the first two months. The lease is effective September 1, 2020 and provides for monthly rental of P12,000 to begin on November 1, 2020. 1.Compute for the rent expense for 2021 2.Determine the total net income to be recognized by the Lessor for the year 2020 as a result of this lease.
Q: On January 1,2022, ABC Company leased its equipment to DEF Company under a 3 year operating lease at…
A: Lease is the agreement which is a contractual arrangement and states that the user to pay the asset…
Q: SNOWMAN Company leased office premises to JACK FROST Inc. for a 5-year term beginning January 2,…
A: Rental revenue on operating leases should be recognized on a straight-line basis unless another…
Q: g lease, rent for the first year is P80,000 and rent for years 2 through 5 is P125,000 per annum.…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…
A: Right of use asset = Advance payment + annual payment * PVAF ( 5% , 3 years ) Right of use asset =…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: Journal entries are prepared to record the financial and non-financial transactions of the business.
Q: Steak Town Company leased equipment for its nine-year useful life, agreeing to pay P500,000 at the…
A: For the determination of lease liability and interest expense for the year December 31, 2022, We…
Q: On January 1, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information…
A: Minimum Lease Payment: It is the rental payments during the lease period. These annual rental…
Q: Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis…
A: Annual rental receipts = $100,000 Lease term = 5 years Interest rate implicit in the lease = 14%
Q: Required: Compute the appropriate entries for Winn Heat Transfer from the beginning of the lease…
A: The journal entries: In the books of Winn Heat Transfer Journal Entries Date Particulars LF…
Q: Stovall Industries leased equipment to Arnett Manufacturing on July 1, 2019, for a ten-year period…
A: Calculate the profit on sales The present value of a rental payment $350,000 Less: Cost of…
Q: On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information…
A: Solution A journal is the company's primary book which records all business transaction of business…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Carrying value of the right of use asset on Jan 1, 2021 = Present value of lease payment on Jan 1,…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A:
Q: Michelle Company leased equipment to May Corporation on July 1, 2012 for an eight-year period…
A: Discount factor = present value of the equipment / Annual lease payment = P3,520,000 /P600,000 =…
Q: Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending…
A: The lease of an asset is a contractual agreement between the lessor and lessee former is the owner…
Q: Ebasan Company leased a building to Bu Corporation on January 1 2021. The lease expires on January 1…
A: Note Amount Annual Rental 3,00,000 Lease Bonus (500000/5) 1 1,00,000 Less: Real Estate…
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: Tamarisk Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment…
A: Journal entry: A journal entry is used to record day-to-day transactions of the business by debiting…
Q: On December 31, 2019, Escapee Company leased machinery from Terminator Corporation for an…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On January 1, 2020, Oriole Company leased equipment to Daylight Corporation. The following…
A: In the above question, the lessee holds the assets for the substantial period of the economic…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Lease means giving out the assets by lessor to lessee to use that assets in return of rent.…
Q: On December 31, 2019, an entity leased two automobiles for executive use. The lease required the…
A: Lease Liability: Lease liability is defined as a compulsion to pat leasing fees to the person who is…
Q: Rich Company uses lease as a means of selling its equipment. On July 1,2019, the company leased an…
A: Date Opening Balance Interest Annual Payment Closing Balance (A) (B) (C) (D) (A*10/100)…
Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
Q: On June 1, 2018, ABC Company entered into a 5-year nonrenewable lease, commencing on that date, for…
A: Lease: It is an agreement between the two parties, in which the lessor leases the asset to the…
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The…
A: 1. Calculate pre-tax lease reported in balance sheet At December 31, 2021: Working:
Q: On January 1, 2020, Evans Company entered into a non-cancelable lease for a machine to be used in…
A:
Q: Required 1 Required 2 Required 3 Prepare an amortization schedule that describes the pattern of…
A: Amortization: Paying off debt with installments, where the installments can be either a series of…
Q: On September 1, 2021, AYE Company entered into one-year nonrenewable lease, commencing on that date,…
A: Total amount paid = Bonus to obtain lease + First month’s rent + Last month’s rent = ₱ 120,000 +…
Q: Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period…
A: Discount factor = present value of the equipment / Annual lease payment = P3,520,000 /P600,000 =…
Q: As an inducement to enter a lease, Aris Company, a lessor, grants Ronald Company, a lessee nine…
A: GIVEN DATA As an inducement to enter a lease, Aris Company, a lessor, grants Ronald Company, a…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: The questions are multiple choice questions. Required Choose the Correct Option.
Q: On January 1, 2020, an entity leased a machinery with the following data: Annual rental payable at…
A: Financial Lease is a process by which asset is is purchased with the help of asset using a lease.…
Q: on january 1, 2021, reindeer signed a long term lease for an office building. the term of the lease…
A: Right of use asset as on January 1,2021 = present value of lease payments + initial direct cost =…
Q: Timmer Company signs a lease agreement dated January 1, 2019,that provides for it to lease equipment…
A: Lease refers to the contractual agreement where user pay the owner for using the asset and the…
Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…
A: The lease liability is a total of the present value discounted at incremental borrowing rate, in…
Q: Wall Company leased office premises to Fox Company for a 5 year term beginning January 1, 2021.…
A: Rent in Year 1 (P 800,000 x 9/12) = P 600,000 Rent in Years 2-5 (P 1,250,000 x 4) = P 5,000,000…
Q: Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2020, to lease…
A: Annual lease payments refers to the annual rental amount that is being paid every year by the lessee…
Q: On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease…
A:
Q: Abert, Inc. signed a five year lease of equipment on January 1, 2021. The lease was classified as an…
A: It is a lease agreement in which the right to use an asset is transferred but the ownership rights…
Q: Prepare an amortization schedule that describes the pattern of interest expense for Federated over…
A: workings:
Q: On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The…
A: Formulas:
Q: Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period…
A: Gross profit from this sale at the inception of the lease = cash selling price of the equipment -…
Q: On January 1, 2021, Coronado Industries leased a building to Sandhill Co. for a ten-year term at an…
A: Current Liabilities are the liabilities which are expected to be paid within the next one year after…
Q: ABC Company uses lease as a means of selling its equipment. On July 1,2019, the company leased an…
A: The correct answer for the above question is given in the following steps.
Q: On January 1, 2019, ABC Company leased an office building with the following term Annual rental at…
A: Lease is legal contract between two parties to use assets or rent assets. Lease agreement is for…
Q: On January 1, 2019, Travel Corporation signed an 8-year operating lease for office space at P300,…
A: Additional rent for 2019 = (annual company sales - 2000000) x 5% = (2500000-2000000)*5% = P25,000
Q: C Milan Sales and Service entered into a lease agreement to lease a fleet of six vehicles from FC…
A: A lease can be defined as financial if certain conditions are satisfied, if the conditions specified…
Q: Bucky Corporation entered into an operating lease agreement to lease equipment from Badger, Inc. on…
A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…
ABC Company leases a machinery from XYZ Company under a twelve-month operating lease. As an inducement to enter the lease, XYZ Company grants ABC free rent for the first two months. The lease is effective September 1, 2020 and provides for monthly rental of P12,000 to begin on November 1, 2020.
1.Compute for the rent expense for 2021
2.Determine the total net income to be recognized by the Lessor for the year 2020 as a result of this lease.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- 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.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, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
- 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.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.Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
- Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.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 Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. Assume that Garvey is required to make payments on December 31 each year.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).As an inducement to enter a lease, Legaspi Company, a lessor, grants Daraga Company, a lessee, nine months of free rent under a five year operating lease. The lease is effective on July 1, 2021, and provides for monthly rental of P500,000 to begin April 1, 2022. In Daraga's income statement for the year ended June 30, 2022, rent expense should be reported as A P5,100,000 B P4,500,000 C P3,825,000 D P1,500,000