Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
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Chapter 3, Problem 14P
Using the chart of accounts in Figure 2-1, determine the changes to the
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Prepare all of the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of lease payments,
and the recognition of revenue. Assume the lessor's annual accounting period ends on December 31, and it does not use reversing
entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the
order presented in the problem.)
Account Titles and Explanation
Date
1/1/20
/1/20
2/31/20
/1/21
2/31/21
Lease Receivable
Cost of Goods Sold
Sales Revenue
(To record the lease)
Cash
Lease Receivable
(To record the receipt of lease payment)
Lease Receivable
Interest Revenue
Cash
Lease Receivable
Lease Receivable
Interest Revenue
Debit
451,000.00
I
Credit
451,000.00
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of
each year, beginning with January 1,
$116,406
Residual value of equipment at end of lease term,
guaranteed by the lessee
$5000
Expected residual value of equipment at end of lease term
$45,000
6 years
6 years
Lease term
Economic life of leased equipment
Fair value of asset at January 1,
$642,000
Lessor's implicit rate
6 %
Lessee's incremental borrowing rate
6 %
The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased
equipment.
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations
to 5 decimal places, eg 1.25124 and the final answers to O decimal places eg. 5,275.)
PHAROAH COMPANY (Lessee)
Lease Amortization Schedule
Annual Lease
Payment Plus…
Big Blue Rental Corp. provides rental agent services to apartment building owners. Big Blue Rental Corp.’s preliminary income statement for August 2019 and its August 31, 2019, preliminary balance sheet did not reflect the following:
Rental commissions of $670 had been earned in August but had not yet been received from or billed to building owners.
When supplies are purchased, their cost is recorded as an asset. As supplies are used, a record of those used is kept. The record sheet shows that $530 of supplies were used in August.
Interest on the note payable is to be paid on May 31 and November 30. Interest for August has not been accrued—that is, it has not yet been recorded. (The Interest Payable of $90 on the balance sheet is the amount of the accrued liability at July 31.) The interest rate on this note is 10%.
Wages of $430 for the last week of August have not been recorded.
The Rent Expense of $1,530 represents rent for August, September, and October, which was paid early in…
Chapter 3 Solutions
Construction Accounting And Financial Management (4th Edition)
Ch. 3 - How do the relationships between the balance...Ch. 3 - Which of the transactions from this chapter result...Ch. 3 - Prob. 3DQCh. 3 - Which of the transactions from this chapter result...Ch. 3 - Prob. 5DQCh. 3 - Prob. 6DQCh. 3 - The following invoices are being entered into the...Ch. 3 - Prob. 9PCh. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...
Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...Ch. 3 - Using the chart of accounts in Figure 2-1,...
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- Larkspur Leasing Company signs a lease agreement on January 1, 2025, to lease electronic equipment to Crane Company. The term of the non-cancelable lease is 2 years, and payments are required at the end of each year. The following information relates to this agreement. 1. Crane has the option to purchase the equipment for $27,000 upon termination of the lease. It is not reasonably certain that Crane will exercise this option. 2. The equipment has a cost of $330, 000 and fair value of $368,000 to Larkspur Leasing. The useful economic life is 2 years, with a residual value of $27,000. 3. Larkspur Leasing desires to earn a return of 6% on its investment. 4. Collectibility of the payments by Larkspur Leasing is probable. Prepare the journal entries on the books of Larkspur Leasing to record the payments received under the lease and to recognize income for the years 2025 and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is…arrow_forwardView Policies Current Attempt in Progress 1. 2. Prepare the journal entries that the lessee should make to record the above transactions assuming the entities report under ASPE. (List all debit entries before credit entries. Credit account titles are automatically indented when the 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.) The lessee makes a lease payment of $75,200 to the lessor for equipment in an operating lease transaction. Wildhorse Company leases equipment from Noble Construction Inc. The present value of the lease payments is $658,000. The lease qualifies as a capital lease.. No. Account Titles 1. 2. List of Accounts Save for Later Debit Credit Attempts: 0 of 1 used Submit Answerarrow_forwardCrane Leasing Company signs an agreement on January 1, 2025, to lease equipment to Cullumber Company. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $230,000. The fair value of the asset at January 1, 2025, is $230,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,339, none of which is gu guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2025. Collectibility of the lease payments by Crane is probable.arrow_forward
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