6. On August 1, 2012, Gabriel Company leased a machine to Baby Company for a six-year period requiring payments of P100,000 at the beginning of each year. The machine cost P480,000, which is the fair value at the lease date, and has a useful life of eight years with no residual value. Gabriel's implicit interest rate is 10% and present value factors are rounded off to three decimal places. Gabriel appropriately recorded the lease as a direct financing lease. At the inception of the lease, the lease receivables account balance should be а. Р600,000 O b. P586,800 c. P480,000 O d. P479,100

6. On August 1, 2012, Gabriel Company leased a machine to Baby Company for a six-year period requiring payments of P100,000 at the beginning of each year. The machine cost P480,000, which is the fair value at the lease date, and has a useful life of eight years with no residual value. Gabriel's implicit interest rate is 10% and present value factors are rounded off to three decimal places. Gabriel appropriately recorded the lease as a direct financing lease. At the inception of the lease, the lease receivables account balance should be а. Р600,000 O b. P586,800 c. P480,000 O d. P479,100

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2020, Mountain Inc. leases a machine used in its operations. The annual lease payment is $10,000 due on December 31 of 2020, 2021, and 2022. The fair value of the machine on January 1, 2020 is $26,730. The machine has no residual value. Mountain could borrow on a three-year collateralized loan at 6%. If the lease is accounted for as a finance lease, the total expenses related to this lease contract that Mountain Inc. will report in its income statement for the year ending December 31, 2020 is Select one: a. $10,600 b. $10,514 c. $10,717 d. $10,000
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5. On June 30, year 1, Menchen, Inc. leased equipment from Davis Leasing. The lease agreement calls for Menchen to make semiannual lease payments of $ 400, 500 over a seven- year lease term, on June 30 and December 31. This is also the assets useful life. The first payment was due immediately on June 30, year 1. The interest rate used is the incremental borrowing rate of 11%. The cost of the asset to Davis was $ 4,051,891 using a factor of 10.11708. a. using an amortization table what amount would Davis show on its balance sheet on December 31, year 1? b. what amount would Davis show on its income statement on December 31,year 1?
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10. On 1 July 2008, Copper Coin Ltd leased a photocopier from Silver Note Corp., a company that manufactures, retails and lease copiers. The photocopier has cost Silver Note Corp. $30,000 to make but had a fair value on 1 July 2008 of $35,080. The lease agreement contained the following provisions: Lease term 3 years Annual payment, payable in advance on 1 July each year $ 14,500 Economic life of the copier 4 years Estimated residual value at the end of the lease term when the $3,000 copier is returned to Silver Note Corp. Residual value guaranteed by Copper Coin $ 1,500 Interest rate implicit in the lease 10% The lease is cancellable, provided another lease is immediately entered into. The annual payment included an amount of $2,500 p.a. to reimburse Silver Note Corp. for the cost of paper and toner supplied to Copper Coin Ltd. Silver Note Corp.'s solicitor prepared the lease agreement for a fee of $1,365. On 30 June2011, at the end of the lease term, Copper Coin Ltd retuned the…
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Carla Vista Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annual payments of $25,500 each, beginning September 1, 2023. In addition, Carla Vista guarantees the lessor a residual value of $14,900 at lease end. The equipment has a useful life of seven years. Assume an interest rate of 12%. (Use tables below, a financial calculator, or Excel functions.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare a schedule contrasting the journal entries prepared using a guaranteed residual value with those using an unguaranteed residual value. Include in your schedule entries on August 31, 2024, for the year-end accrual of interest in the lease obligation and the recording of annual depreciation expense using the straight-line method and assuming no residual value. (List all debit entries before credit entries. Credit account titles are automatically…
16. On January 1, 2014, summer company signed a 2 year lease for a machine, where they must make annual payments of $500 at the end of each year. The market interest is 10% and the market value of the machine is $800. Is this a capital lease or an operating lease? why?
American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2013. The lease agreement for the $5.5 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton's implicit interest rate was 11% (also American Food Services' incremental borrowing rate). Required: 1) Prepare a journal entry for American food service at the beginning of the lease on January 1, 2024 2) Prepare an amortization schedule for the four-year term of the lease 3) Prepare the appropriate entries related to the lease on December 31, 2024 and 2026