On January 1, 2019, Ashly Farms leased a hay baler from Agrico Company. The lease requires Ashly to make $3,000 payments on January 1 of each year for 5 years beginning in 2019. The interest rate is 12%. Calculate the present value of Ashly's lease payments as of January 1, 2019.

On January 1, 2019, Ashly Farms leased a hay baler from Agrico Company. The lease requires Ashly to make $3,000 payments on January 1 of each year for 5 years beginning in 2019. The interest rate is 12%. Calculate the present value of Ashly's lease payments as of January 1, 2019.

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...

See similar textbooks

Similar questions

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.
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 January 1, 2021, Calloway Company leased a machine to Zone Corporation. The lease qualifies as a sales-type lease. Calloway paid $300,000 for the machine and is leasing it to Zone for $33,000 per year, an amount that will return 8% to Calloway. The present value of the lease payments is $300,000. The lease payments are due each January 1, beginning in 2021. What is the appropriate interest entry on December 31, 2021? Multiple Choice Cash Interest revenue. Cash Interest receivable Interest receivable Interest revenue. Interest receivable Interest revenue 24,000 21,360 21,360 24,000 24,000 21,360 21,360 24,000
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 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 barg 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. Timmer’s incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment1. Calculate the amount of the asset and…
On December 31, 2021, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $98,099.The lease agreement specified annual payments of $26,000 beginning December 31, 2021, the beginning of the lease, and at each December 31 through 2024. Branch Motors’ interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2025) the truck was expected to be worth $16,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line amortization or depreciation.Yard Art guaranteed a residual value of $6,000. Yard Art’s incremental borrowing rate is 10% and is unaware of Branch’s implicit rate.A $1,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expedient, Branch Motors agreed to pay this fee. It is, however, reflected in the $26,000 lease payments.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of…
On January 1, 2019, Jix'N leased two automobiles for executive use. The lease requires Jix'N to make five annual payments of P1,300,000 beginning January 1, 2019. At the end of the lease term, December 31, 2023, the entity guaranteed the residual value of the automobiles at P1,000,000. The lease qualifies as finance lease. The interest rate implicit in the lease is 9%. Present value factors for the 9% rate implicit in the lease are as follows: For an annuity due with 5 payments (in advance) 4.240 For an ordinary annuity with 5 payments 3.890 Present value of 1 for 5 periods 0.650 What is the finance lease liability immediately after the first required payment?
Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019. Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000. The interest rate implicit in the lease is 9%. The PV of an ordinary annuity of 1 for nine years at 9% is 5.60. 1. What amount should be reported as lease liability on December 31,2020? a. ₱ 4,500,000 b. ₱ 2,912,000 c. ₱ 4,680,000 d. ₱ 2,800,000 2. What is the initial recognition of the right of use asset? a. ₱ 3,112,000 b. ₱ 2,800,000 c. ₱ 3,000,000 d. ₱ 4,700,000 3. What is the carrying value of the right of use asset on December 31, 2021? a. ₱ 2,520,000 b. ₱ 2,488,889 c. ₱ 2,750,000 d. ₱ 2,666,667
On January 1, 2020, Eduardo Company leased two automobiles for executive use. The lease requires Eduardo Company to make five annual payments of P1,000,00 beginning January 1, 2020. At the end of the lease term, December 31, 2024, Eduardo Company guaranteed the residual value of the automobiles at P500,000. The lease is considered by the company as a finance lease. The interest rate implicit in the lease is 10%. What is the principal lease liability on December 31, 2021?
On December 31, 2019, Lewis Corp. (Lewis), a publicly accountable entity, leased a tractor from Jade Leasing Corp. (JLC). The lease term is for seven years, after which the asset must be returned to JLC. The annual lease payments are $45,000, with the first payment due on December 31, 2019. The interest rate implicit in the lease is 6% and is known to Lewis. Lewis’s incremental borrowing rate is 5%. The guaranteed residual value of the tractor at the end of the lease term is $50,000, and Lewis expects that the tractor’s fair value when returned to JLC will be $30,000. Required: Prepare all journal entries required by Lewis for the tractor lease on December 31, 2019, and for the year ended December 31, 2020
Ayayai Corporation leased equipment to Kingbird, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,151 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $9,900, a book value of $7,900, and Ayayai expects a residual value of $7,400 at the end of the lease term. Ayayai set the lease payments with the intent of earning a 4% return, though Kingbird is unaware of the rate implicit in the lease and has an incremental borrowing rate of 6%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Prepare all necessary journal entries for Kingbird in 2020
Cullumber Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $29,169 at the beginning of each year. The first payment is received on January 1, 2020. Cullumber had purchased the machine during 2019 for $109,000. Collectibility of lease payments by Cullumber is probable. Cullumber set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Cullumber at the termination of the lease. Prepare all necessary journal entries for Cullumber for 2020.
On January 1, 2020, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000, while the expected residual value at the end of the lease is $5,00O. 1. Equal rental payments are due on January 1 of each year, beginning in 2020. 2. The fair value of the equipment on January 1, 2020, is $150,000O, and its cost is $120,000. 3. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight- line basis. 4. Bensen set the annual rental to ensure a 5% rate of return. Flynn's incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 5. Collectibility of lease payments by the lessor is probable. 6. Both the lessor and the lessee's accounting periods end on December 31. Prepare all the necessary journal entries for Bensen for 2020. Credit account titles are…