Present value of 1 discounted at 10% for 4 periods is 0.68301. Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. Present value of ordinary annuity of 1 at 10% for 4 periods is 3.16987. How much

Present value of 1 discounted at 10% for 4 periods is 0.68301. Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. Present value of ordinary annuity of 1 at 10% for 4 periods is 3.16987. How much

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
On March 1, 2021, Happy Company leased equipment to Great Company for a four-year period ending February 28, 2025. The equipment cost Happy Company P310,000 and has an expected useful life of five years. Annual payments are P109,047, which includes P10,000 executory costs. The equipment’s fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every March 1 and Happy Company made the first payment on March 1, 2021. The lessor’s implicit interest rate is 10%. Happy Company incurred P16,000 costs to consummate the lease contract. • Present value of 1 discounted at 10% for 4 periods is 0.68301. • Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. • Present value of ordinary annuity of 1 at 10% for 4 periods is 3.16987. How much is the gross investment in the lease prior to the first payment?
On January 1, 2021, Veronica Company negotiated a 15-year lease for a building with useful life of 20 years. Before occupancy, the lessee incurred leasehold improvement of P600,000 with useful life 5 years. The lessee is required to restore the building upon expiration of the lease. The present value of estimated cost of restoration is P644,000 discounted at 7%. Annual payments of P1,000,000 are payable to the lessor on December 31 of each of the 15 years of the lease term. The lease was negotiated to assure the lessor a 10% rate of return. PV of an ordinary annuity of 1 at 10% for 15 periods PV of an annuity of 1 in advance at 10% for 15 periods 7.606 8.367 Required: Prepare journal entries on the books of Veronica Company for 2021.
On March 1, 2021, Black Company leased equipment White Company for a four-year period ending February 28, 2025. The equipment cost Black Company P310,000 and has an expected useful life of five years. Annual payments are P109,047, which includes P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every March 1 and White Company made the first payment on March 1, 2021. The lessor's implicit interest rate is 10%. Black Company incurred P16,000 costs to consummate the lease contract. The present value of 1 discounted at 10% for 4 periods is 0.68301. The present value of an annuity due of 1 for 4 periods discounted at 10% is 3.48685. The present value of an ordinary annuity of 1 at 10% for 4 periods is 3.16987. 1. How much profit, inclusive of interest revenue, should Black Company report from this lease for the year ended December 31, 2021? (round off the final answer to the nearest peso)
On January 1, 2021, Elle Company acquired a machine by signing a four-year lease. Annual rentals are payable at the beginning of each year starting January 1, 2021. The asset’s useful life is 6 years, at the end of which the asset’s scrap value is expected to be P80,000. Elle Company uses the straight-line method to depreciate this asset. The lessor’s implicit interest rate, known to Elle is 10%. Elle appropriately recorded the machine and the related liability on January 1, 2021, at P697,380. How much is the periodic annual rental payment in the lease contract? (Use four decimal places)
Saludares Company leased a machinery on January 1, 2021 with the following information: Annual rental payable at the end of each year is P1,000,000. A P300,000 payment is made to the lessor to obtain a long-term lease. At the end of the lease term, dismantling and restoring the machinery is required by contract. The present value of this obligation is P330,000. Annual executory costs paid by the lessee amount to P50,000. Lease term is 4 years and the useful life of the machinery is 8 years. The implicit rate is 10%. The PV of an ordinary annuity of 1 at 10% for 4 periods is 3.17 and the PV of 1 at 10% for 4 periods is 0.68. 1. What is the depreciation for 2021?2. What is the lease liability on December 31, 2021?
Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Sharrer has an incremental borrowing rate of 9%. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals of $34,133 are payable on each January 1st, beginning January 1, 2017. Present value of an ordinary annuity of 1 for 3 periods at 8% : 2.57710 Present value of an ordinary annuity of 1 for 3 periods at 9% : 2.53130 Present value of annuity due of 1 for 3 periods at 8% : 2.78324 Present value of an annuity due of 1 for 3 periods at 9% : 2.75911 Please indicate what the lessee would record for the following journal entries in 2017. Round to the nearest whole dollar. Dr. ROU Asset…
Waterworld Company leased equipment from Costner Company. The lease term is 4 years and requires equal rental payments of $43,019 at the beginning of each year. The equipment has a fair value at the inception of the lease of $150,000, an estimated useful life of 4 years, and no salvage value. Waterworld pays all executory costs directly to third parties. The appropriate interest rate is 10%. Prepare Waterworld’s January 1, 2017, journal entries at the inception of the lease.
Edom Company, the lessor, enters into lease with Davis Company to lease equipment to Davis beginning January 1, 2016. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. 2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs. 4. The interest rate implicit in the lease is 14%. 5. The initial direct costs are insignificant and assumed to be zero. 6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Required: 1. Next Level Determine if the lease is a sales-type or direct financing lease from Edom's point of view…
Welington Company purchased a new machine for P4,800,000 on January 1, 2016 and leased the same to Daniel. The machine has an estimated 12-year life, and will be depreciated P400,000 per year. The lease if for a three-year period expiring January 1, 2019, at an annual rental of P850,000. The implicit rate on the lease is 12%. Additionally, Daniel paid P300,000 to Welington as a lease bonus to obtain the three-year lease. For 2016, Daniel incurred insurance expense of P80,000 for the leased machine. What is Daniel's right of use of asset at December 31, 2016? Use 2 decimal points in computing for the PV