PÅ Adapted) Problen At inception of the lease, Glen Company received P2,000,000 This deposit will not be returned to Dix Company upon covering the first two years' rent of P1,000,000 and a security On January 1, 2020, Glen Company leased a building to Dix for the last two years of the lease. expiration of the lease but will be applied to payment of rent Company for a ten-year term at an annual rental of P500,000. v inception of the lease, Glen Company received P2,000,000 At ing the first two years' rent of P1,000,000 and a security deposit of P1,000,000. What amount should be reported as current and noncurrent liability in the December 31, 2020 statement of financial position? Current liability Noncurrent liability 2,000,000 1,000,000 1,000,000 a. 500,000 1,000,000 1.000 000 b. C. 500 000
Q: ABC Company leased into a ten-year non-cancelable lease requiring year-end payments of P1,200,000 on…
A: Lease Payment: P1,200,000 Implicit interest rate: 10% Initial direct cost: P150,000 Amount financed…
Q: On January 1, 2021, Overland Company closed a lease contract for newly constructed terminals and…
A:
Q: The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and…
A: Amortization is the method of repaying a loan over time with monthly instalments. The straight-line…
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, 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: Compute the value of the lease liability at lease commencement. Lease liability $
A: Lease refers to a contract between two parties under which one party who is the real owner of an…
Q: Sheridan Co. manufactures equipment that is sold or leased. On December 31, 2021, Sheridan leased…
A:
Q: On December 31, 2019, Oriole Company leased machinery from Terminator Corporation for an agreed upon…
A: As per the accounting standard, A lease means where an asset owner gives his asset custody to some…
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, 20x1, ABC Co. enters into a 4-year lease of office equipment. Annual rental payable at…
A: Lease is a contract whereby one party gives the right to use of the asset to another person who is…
Q: Indigo Corporation agrees on January 1, 2020, to lease equipment from Packers, Inc. for 3 years. The…
A: Here we can see that since the does not transfer ownership, contain a bargain purchase option, and…
Q: .. As an inducement to enter a lease, Legaspi Company, a lessor, grants Daraga Company, a lessee,…
A: Solution... Monthly rent expenses = P500,000 Rent starts from = 1st April Rent expenses on June…
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: Journal entries refers to the process of recording the financial transactions of a company in its…
Q: On January 1, 2018, Haley Corporation sold a Machine to Quick Finance for P140,000 and immediately…
A: Lease liability: It represent the amount recognized by a lessee on its statement of financial…
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: A lease is a type of agreement or a contract in which resources are given on lease and for which…
Q: Delray Leasing Company signs an agreement on January 1, 2020, to lease equipment to Swifty Company.…
A: Journal entries (JE) refers to the event which are being recorded in the books or original books of…
Q: On January 1, 2021, a lessee company signed a noncancelable finance lease for a piece of equipment.…
A: The present value of lease liability on Jan 1,2021 is $467,000. The annual payment beginning from…
Q: Crane Company leased machinery to Stine Company on July 1, 2021, for a 10-year period expiring June…
A: Lease accounting: Lease accounting is an accounting system used to record the financial impact due…
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, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement…
A: Solution:- Calculation of the cost of amortization in 2021 as follows under:-
Q: Bravo Co. on January 1, 2021, enters into a nine-year non-cancelable lease for equipment having an…
A: (a) A finance lease is a lease by a Financial company where the legal owner of the leased asset…
Q: On January 1, 2020, Juris Company leased a building to Jay Company for a ten-year term at an annual…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: On January 1, 2021, a lessee company signed a noncancelable finance lease for equipment. The lessee…
A: On 01.01.2021, A lessee company signed a noncancelable finance lease for equipment. Lessee make…
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: What portion of the P2,000,000 should be reported as current liability on December 31, 2019?
A: The determination of amount that should be reported as current liability on December 31, 2019 is…
Q: On January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual…
A: Current liabilities are those liabilities that need to be paid or settled within a short period of…
Q: The following facts pertain to a non-cancelable lease agreement between Cullumber Leasing Company…
A: Lease is a contractual arrangement between two or more parties in exchange of property and money for…
Q: liability in the December 31, 2020 statement of financial expiration of the lease but will be…
A: Solution: Total amount received by Glen company = P2,000,000 Amount against two years rent =…
Q: On July 1, 2021, an entity leased an equipment to a lessee under a 3-year operating lease. Total…
A: Average monthly rent = Total rent for lease term / lease term = 3600000/36 months = P100000
Q: On January 1, 2019, Amity Company leases a crane to Baltimore Company. The lease contains the…
A: Journal entries: It is the duty of the accountant to record and summarize business economic and non…
Q: Windsor Leasing Company signs a lease agreement on January 1, 2020, to lease warehouse equipment to…
A: Lease agreement is an agreement between two parties in which one party provides its asset for use to…
Q: An entity is a manufacturer of machinery. It uses lease agreements to sell its product, On January…
A: Solution: Amount of sales revenue should be recognized by entity = Present value lease payments +…
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, 2020, Sitra Company loased equipment from National Corporation Lease payments are…
A: The minimum lease payments include the lease payments made each year to the lessor, guaranteed…
Q: On January 1, 20x1, ABC enters into a 4-year lease of office equipment. The rent in 20x1 is…
A: SOLUTION- EXPLANATION- LEASE RENTALS FOR YEAR. 20X1 10000 20X2 11000 (10000*110%) 20X3…
Q: On January 1, 2021, the lessee company signed an operating lease to lease a building from the…
A: It is an agreement whereby the Lessee secures the right to use the asset but not its ownership.
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 September 1, 2021, DHI Sound System Company leased office furniture and equipment at a monthly…
A: SOLUTION FORMULA= TOTAL RENT FOR LEASE TERM = LEASE TERM - FREE LEASE MONTHS * MONTHLY RENT .
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: On January 1, 2019, an entity leased a machinery for 4 years which is the same as the useful life of…
A: Calculation of present value of lease laibility discounted at 12% for four years:: Annual lease…
Q: On January 1, 2021, Ehr Company leased a building to Dent Corporation for a ten-year term at an…
A: GIVEN DATA On January 1, 2021, Ehr Company leased a building to Dent Corporation for a ten-year…
Q: The following information pertains to a leased contract entered into by Blue Company, lessee, on…
A: The lease liability is measured at present value and any modification in the lease liability that…
Q: ABC Company leases a machinery from XYZ Company under a twelve-month operating lease. As an…
A: In an operating lease, the lessor recognized lease income in their income statements, and the lessee…
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: Monty Leasing Company agrees to lease equipment to Flounder Corporation on January 1, 2020. The…
A: Leasing an asset or a resource means giving the asset on rent for regular payments.
Q: As an inducement to enter a lease, CEE Company, a lessor, grants ABC Management Corporation, a…
A: Total rent for the lease term = (Lease term - free lease months) x monthly rent = (24 months - 9…
Q: Sheridan Company leases a building to Skysong, Inc. on January 1, 2020. The following facts pertain…
A: Sheridan would classify the lease as a Sale Type lease. Since Asset is not transferred at the end of…
Q: On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement…
A: Amortization is the reduction in the value of intangible asset over a period of time.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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.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.
- 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.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.
- 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.)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.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).
- Financial Statement Violations of U.S. GAAP The following are the financial statements issued by Allen Corporation for its fiscal year ended October 31, 2019: Notes to Financial Statements: 1. Long-Term Lease. Under the terms of a 5-year, noncancelable lease for a building, Allen is obligated to make annual rental payments of 40,000 in each of the next 4 fiscal years. 2. Pension Plan. Substai1tially all employees are covered by Allens defined benefit pension plan. Pension expense is equal to the total of pension benefits accrued and paid to retired employees during the year. Because it is a defined benefit plan that is paid every year, no pension liability exists. 3. Patent. The patent had an estimated remaining life of 10 years at the time of purchase. Allens patent was purchased from Apex Corporation on January 1, 2019, for 250,000. 4. Deferred Income Tax Payable. The entire balai1ce in the Deferred Income Tax Payable account arose from tax-exempt municipal bonds that were held during the previous fiscal year, giving rise to a difference between taxable income and reported net earnings for the fiscal year ended October 31, 2019. The deferred liability amount was calculated on the basis of past tax rates. 5. Warrants. On January 1, 2018, one common stock warrant was issued to shareholders of record for each common share owned. An additional share of common stock is to be issued upon exercise of 10 stock warrants and receipt of an amount equal to par value. For the 6 months ended October 31, 2019, the average market value for Allens common stock was 5 per share and no warrants had yet been exercised. 6. Contingent Liability. On October 31, 2019, Allen was contingently liable for product warranties in an amount estimated to aggregate 75,000. Required: Next Level Review the preceding financial state1nents and related notes. Identify any inclusions or exclusions from them that would be in violation of GAAP, and indicate corrective action to be taken. Do not comment as to format or style. Respond in the following order: 1. Balance sheet 2. Notes 3. Income statement 4. Statement of retained earnings 5. GeneralLessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line methodOn January 1,2019, Glen Company leased a building to Mix Company for 10-year term at an annual rental of P500,000. At inception of the lease, Glen received P2,000,000 covering the first two years rent of P1,000,000 and a security deposit of P1,000,000. This deposit will not be returned to Mix Company upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the P2,000,000 should be reported as current liability on December 31, 2019?