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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.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).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.
- Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.Assume the following: 2,000 SF rentable area, 4-year triple net lease at $18.00 p.s.f. per year, with monthly payments ($1.50 per month). Tenant improvements paid by tenant at lease commencement (that will not be recovered): $40,000, 8% discount rate is appropriate What is "effective" rent p.s.f.? Assume the following: 2,000 SF rentable area, 4-year triple net lease at $18.00 p.s.f. per year, with monthly payments ($1.50 per month). Tenant improvements paid by tenant at lease commencement (that will not be recovered): $40,000, 8% discount rate is appropriate What is "effective" rent p.s.f.? $23.82 $24.05 $23.28 $22.98Calculate minimum lease payments for A Ltd. who took an asset on a 5 years lease from B Ltd. using the following information: Payments over the lease term Contingent rent Cost for services given by B Ltd. Taxes to be reimbursed to B Ltd. Residual value guaranteed by A Ltd. Fair value of asset after 5 years 1,000 per month *20,000 40,000 15,000 5,000 6,000 Also, A Ltd. has an option to purchase the asset after a period of 5 years at 2,000. It is reasonably certain that A Ltd. will exercise the option. Required Calculation Minimum Lease Payments.
- On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. What total amount of finance income will Entity Y recognize over the lease term?Problem 5. Operating Lease- Lessor On January 1, 2 0x1, Lessor entered into operating lease. an Information followS: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to Cover for costs of administrative tasks is to be paid for any excess of sales of Lessee over P1,000,000. Lessee's sales for 20x1 are P1, 100, 000. Additional rent of 10% The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual depreciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.On January 1, 20x1, Entity Y leases out an equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. How much is the gross investment on January 1, 20x1? Select the correct response: O 300,000 500,000 200,000 400,000
- John Limited leses an asset from Smith Limited. The lease agreement has the following terms: lease term is 3 years estimated economic life of the leased asset is 6 years 3 x annual rental payments of $24 000 each payment is one year in arrears İncluded in the amount of annual rental payments is an amount of $1 000 to cover repairs and maintenance of the leased asset residual value at the end of the lease term is not guaranteed by the lessee John Ltd incurs initial direct costs of $500 interest rate implicit in the lease is 7% At the commencement of the lease, the amount of lease liability would be measured as: Group of answer choices $60 359. $62 983 $60 859 $64 5843. the information below relates to a sales type lease in which lease payments are made semiannually at the beginning of each period Lease term Lessor's desired rate of return Lesse's incremental borrowing rate Current fair market value of leased asset 5 years 12% per year 10% per year $600,000 Based on the information above, calculate the amount of the semi-annual payment as determined by the lessor.essment iorms/d/e/1F lease choose the correct 1. What's the future value of $1,500 after 5 years if the appropriate interes rate is 6%, compounded annually? O a) $2,620 O b) $5,016 O c) S2,007 O d) S1,500 O e) None of theia 2. What's the present va recelved after 3years if the appropriate interest rate apounded annually O a) s3.020