Reporting a Finance LeasePier10 Inc. entered into a five-year lease and recorded a right-of-use asset and lease liability of $88,000 onJanuary 1. Pier10 Inc. was aware of the lessor's implicit rate of interest of 5%. The equipment under lease haan estimated five-year useful life with no residual value. The first lease payment of $19,358 was due uponcommencement of the lease.Show the balance sheet presentation on December 31,and the income statement presentation for the year ended December 31.Note: Round your answers to the nearest whole dollar..Note: Do not use negative signs with your answers.AssetsBalance SheetNoncurrent assets:Right-of-Use AssetLiabilitiesCurrent liabilities:Lease LiabilityNoncurrent liabilities:Lease LiabilityIncome StatementDecember 3188,000 *19,358 ✓0 %December 31ExpensesInterest Expense$3,432 ✔Amortization Expense17,600 ✓

A lease is a contractual agreement granting the right to use an asset, such as property or…

Assets Balance Sheet December 31 Noncurrent assets: Right-of-Use Asset Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Income Statement 88,000 x 19,358 v 0 x December 31 Expenses Interest Expense $ 3,432 Amortization Expense 17,600

Assets Balance Sheet December 31 Noncurrent assets: Right-of-Use Asset Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Income Statement 88,000 x 19,358 v 0 x December 31 Expenses Interest Expense $ 3,432 Amortization Expense 17,600

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 1P: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases...

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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).
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.
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Terms of a lease agreement and related facts were: a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction incurred by the lessor were $5,408. b. The retail cash selling price of the leased asset was $425,000. Its useful life was three years with no residual value. c. The lease term is three years and the lessor paid $425,000 to acquire the asset. d. Annual lease payments at the beginning of each year were $160,000. e. Lessor's implicit rate when calculating annual rental payments was 13%. (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. Prepare the appropriate entries for the lessor to record the lease and related payments at its beginning, January 1, 2018. 2. Calculate the effective rate of interest revenue after adjusting the net investment by initial direct costs. 3. Record any entry(s) necessary at December 31, 2018, the fiscal year-end.…
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The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $91,200 Lease term, 4 years Economic life of property, 5 years Implicit interest rate, 6% Annual lease payment due on December 31, $25,600 Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. By how much does the lease liability decrease during the first year? Select one: a. $20,128 b. $25,600 c. $20,278 d. $5,322 PreviousSave AnswersFinish attempt ...
Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 8% Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the inception of the lease through January 1, 2012. Edison's financial year ends December 31.
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