Assume that on December 31, 2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger fromAero Field Management Company. The following information pertains to this lease agreement:1.The agreement requires equal rental payments of $164,588 beginning on December 31, 2019.2. The fair value of the building on December 31, 2019 is $1,114,500.The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an expected residualvalue of $34,900. Teal Mountain depreciates similar buildings on the straight-line method.3.4.The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.5.Teal Mountain's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Teal Mountain. Right-of-Use Asset1175541Lease Liability1083384(To record the lease)ILease LiabilityCash(To record first lease payment)'20Amortization ExpenseRight-of-Use Asset

2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement ro Field Management Company. The following information pertains to this lease agreement: The agreement requires equal rental payments of $164,588 beginning on December 31, 2019. The fair value of the building on December 31, 2019 is $1,114,500. 3. The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an e value of $34,900. Teal Mountain depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.

2019, Teal Mountain Aerospace signs a 8-year, non-cancelable lease agreement ro Field Management Company. The following information pertains to this lease agreement: The agreement requires equal rental payments of $164,588 beginning on December 31, 2019. The fair value of the building on December 31, 2019 is $1,114,500. 3. The building has an estimated economic life of 10 years, a guaranteed residual value of $49,600, and an e value of $34,900. Teal Mountain depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.

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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

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Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
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 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?
Assume that on December 31, 2019, Marin Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $159,660 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,082,878. 3. The building has an estimated economic life of 10 years, a guaranteed residual value of $50,900, and an expected residual value of $36,100. Marin depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Marin’s incremental borrowing rate is 6% per year. The lessor’s implicit rate is not known by Marin. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the journal entries on the lessee’s books to reflect…
Assume that on December 31, 2019, Marin Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $159,660 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,082,878. The building has an estimated economic life of 10 years, a guaranteed residual value of $50,900, and an expected residual value of $36,100. Marin depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. Marin's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Marin. 5.
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Partially…
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $486,019. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $12,000, and an expected residual value of $9,800. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer…
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $67,599 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $494,051. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $5,500. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this…
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $ 67,299 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $ 492,571. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $ 10,500, and an expected residual value of $ 7,300. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark.
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,799 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $488,254. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $9,000, and an expected residual value of $6,300. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease…
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,599 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $487,267. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,500. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this…
Assume that on December 31, 2019, Kimberly-Clark Corp. signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage Company. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $66,599 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $487,267. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of $10,000, and an expected residual value of $7,500. Kimberly-Clark depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. Kimberly-Clark’s incremental borrowing rate is 8% per year. The lessor’s implicit rate is not known by Kimberly-Clark. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the…