Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $1,800,000 at the commencement of the lease.
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- Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $450,000 at the commencement of the lease. • Note: Round your answers to the nearest whole dollar. Date 1) Dec. 31 Account Name Lease Receivable Cost of Goods Sold Sales Revenue Dr. 30,000 Cr. 0x v 450,000 v с x 0 450,000 Inventory To derecognize asset and record investment in lease 2) Dec. 31 Cash Lease Receivable To record receipt of lease payment 70,000 D 0 70,000✔Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. Prepare the lessor's journal entries on December 31 to record the (1) lease receivable and (2) receipt of the first payment, assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $450,000 at the commencement of the lease. • Note: Round your answers to the nearest whole dollar. Date 1) Dec. 31 2) Dec. 31 Account Name To derecognize asset and record investment in lease To record receipt of lease payment Dr. Cr.The lessor company leases a building to the lessee company on 1/1/2021. The lessee will make ten annual rental payments of $77,000 at the beginning of each year, starting from 1/1/2021. Both parties expect a residual value of $17,000 at the end of the lease term, though this amount is not guaranteed. The lessor company set the lease payments with the intent of earning a 10% return, and the lessee is aware of this rate. Suppose the lessee incurs initial direct costs of $4,360 related to the lease. What is the amount for Right-of-Use Asset the lessee will record on 1/1/2021? (You must choose from the following present/future values. Please do not use the tables in the textbook, tables posted on the Blackboard, or values from a financial calculator.) Future Value Single Sum Present Value Single Sum Future Value Ordinary Annuity Present Value Ordinary Annuity Present Value Annuity Due 10%, 10 periods 2.59 0.39 15.94 6.14 6.76
- Smith, the lessee, signs an eight-year lease agreement on December 31 for the floor of a building that requires annual payments of $70,000, beginning immediately. The residual value of $50,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual value of $30,000 at the end of the lease term. Smith is aware of the lessor's implicit rate of interest of 7%. rate of interest of 7% Prenare the leccor's inurnal entries on December 31 to record the (1) leace receivable and (2) receint of the first navment assuming that the lease is properly classified as a sales-type lease. The carrying value of the equipment is $450,000 at the commencement of the lease. N Note: Round your answers to the nearest whole dollar. = Nare' koung your answers in the nearest wanie nnuar Date TIDEL. SI 1) Dec. 31 2) Dec. 31 Account Name To derecognize asset and record investment in lease To record receipt of lease payment ======== Dr. Cr.On January 1, Porter Moving and Storage leased a truck for a four-year period, at which time possession of the truck will revert back to the lessor. Annual lease payments are $30,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. If Porter’s revenues exceed a specified amount during the lease term, Porter will pay an additional $12,000 lease payment at the end of the lease. Porter estimates a 60% probability of meeting the target revenue amount. What amount, if any, should be added to the right-of-use asset and lease payable under the contingent rent agreement?Vaughn Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $56,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Vaughn's incremental borrowing rate is 8%. Vaughn is unaware of the rate being used by the lessor. At the end of the lease, Vaughn has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Vaughn uses the straight-line method of depreciation on similar owned equipment. Prepare the journal entries, that Vaughn should record on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to O decimal places e.g.…
- On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 View transaction list 1 Journal entry worksheet 2 (A) Beginning Balance of Lease Liability 3 $ 51,000 33,000 16,981 Note: Enter debits before credits. Date Year 1 December 31 (B) Debit Interest on Lease Liability 6.003% X (A) 3. Prepare the December 31 journal entry to record straight-line amortization with zero salvage value at the end of (a) Year 1, (b) Year 2, and (c) Year 3. 1,981 1,019 $ 3,000 + General Journal (C) Debit Lease Liability (D) (B) $ 18,000 16,019 16,981 $ 51,000 Record amortization of right-of use asset at December 31 of…payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield’s incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment.Blossom Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $41,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Blossom's incremental borrowing rate is 6%. Blossom is unaware of the rate being used by the lessor. At the end of the lease, Blossom has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blossom uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Prepare the journal entries, that Blossom should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.…
- On January 1, Rogers (lessee) signs a three-year lease for machinery that is accounted for as a finance lease. The lease requires three $18,000 lease payments (the first at the beginning of the lease and the remaining two at December 31 of Year 1 and Year 2). The present value of the three annual lease payments is $51,000, using a 6.003% interest rate. The lease payment schedule follows. Date January 1, Year 1 December 31, Year 1 December 31, Year 2 View transaction list Journal entry worksheet 1 (A) Beginning Balance of Lease Liability $ 51,000 33,000 16,981 2. Prepare the January 1 journal entry to record the first $18,000 cash lease payment. Note: Enter debits before credits. (B) Debit Interest on Lease Liability 6.003% X (A) $0 1,981 1,019 $ 3,000 Record the first lease payment on January 1. Date Year 1 January 01 + General Journal (C) Debit Lease Liability (D) (B) $ 18,000 16,019 16,981 $ 51,000 Debit Credit (D) Credit Cash Lease Payment $ 18,000 18,000 18,000 $ 54,000 (E) Ending…Ivanhoe Ltd., which has a calendar year end, entered into an equipment lease on June 1, 2023, with Cullumber Financing Limited. The lease term is two years and requires payments of $3,500 at the end of each month beginning September 30. The stated rate of interest in the lease is 6%. As an incentive for entering into the contract, Cullumber has agreed to forgive the first three payments under the lease (June, July, and August). Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (b) Your answer is incorrect. Calculate the amount that Ivanhoe should record for the lease obligation on June 1, 2023. Hint: Calculate the present value of the monthly payments as at September 1, 2023, and then discount this amount to June 1, 2023. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round intermediate calculations and final answer to 2 decimal places, e.g. 5,275.25. Round interest…Pearl Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $51,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Pearl's incremental borrowing rate is 6%. Pearl is unaware of the rate being used by the lessor. At the end of the lease, Pearl has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Pearl uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Your answer is partially correct. Prepare the journal entries, that Pearl should record on December 31, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0…