FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- On January 1, Lessee Company leases equipment with a useful life of 5 years for a 6-year lease term. Payments of $88,000 are due at the beginning of each year. The incremental borrowing rate is 4%. The present value of the payments is $407,440. Which of the following is true? Interest expense at the end of the first year is $407,440 x .04 Amortization expense at the end of the first year is $407,440 divided by 6. Lease expense at the end of the first year is $88,000. Interest expense at the end of the first year is $319,440 x .04arrow_forwardOn January 1, Lessee Company leases equipment with a useful life of 5 years for a 3-year lease term. Payments of $52,000 are due at the beginning of each year. The incremental borrowing rate is 3%. The present value of the payments is $151,320. Which of the following is true? Lease expense at the end of the first year is $52,000. Amortization expense at the end of the first year is $151,320 divided by 3. The lease liability at the end of the first year is reduced by $52,000. The ROU asset at the end of the first year is $99,320.arrow_forwardGeneral Accountingarrow_forward
- Applying New Lease Accounting Standards for Operating Leases On January 1 of the current year, CCH Corporation entered into the following lease contract. Based on the facts, CCH Corporation classifies the lease as an operating lease. Details of lease contract Leased asset Office space Lease term 5 years Annual lease payment $115,487 Upfront fees $10,000 Cost of debt capital 5% a. Determine the amount of the lease liability that CCH will add to its balance sheet at the inception of the lease. Amount of lease liability b. What amount will be added to the balance sheet as an asset? Amount added as an asset The rest of the questions are given in pictures below. please answer all parts correctly. i will upvote. thank you!!arrow_forwardSubject :- Accountingarrow_forwardReporting a Finance Lease Pier10 Inc. entered into a five-year lease and recorded a right-of-use asset and lease liability of $88,000 on January 1. Pier10 Inc. was aware of the lessor's implicit rate of interest of 5%. The equipment under lease ha an estimated five-year useful life with no residual value. The first lease payment of $19,358 was due upon commencement of the lease. Show the balance sheet presentation on December 31, and the income statement presentation for the year ended December 31. Note: Round your answers to the nearest whole dollar.. Note: Do not use negative signs with your answers. Assets Balance Sheet Noncurrent assets: Right-of-Use Asset Liabilities Current liabilities: Lease Liability Noncurrent liabilities: Lease Liability Income Statement December 31 88,000 * 19,358 ✓ 0 % December 31 Expenses Interest Expense $ 3,432 ✔ Amortization Expense 17,600 ✓arrow_forward
- ok nt ences A finance lease agreement calls for quarterly lease payments of $7,056 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $168,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required B >arrow_forwardI. Leases On January 1, 2020, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $120,987 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $550,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective- interest basis. Cage's incremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known by Cage. Title to the equipment transfers to Cage at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Instructions: (a) Prepare the journal entry or entries that Cage should record on January 1, 2020. (Show two separate entries. One for recording the leased asset and one to record the initial payment). (b) Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2020. Include an amortization schedule. (c) Prepare the journal entry to…arrow_forwardManufacturers Southern leasedhigh tech electronics equipment from international machines on January 1, 2024. international machines manufactured the equipment at a cost of $89,000. Manufacturers Southern's fiscal year ends December 31. Manufacturers Southern's fiscal year ends December 31. Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,000 at the beginning of each period Economic life of asset 2 years Fair value of asset $117,590 Implicit interest rate 10% Required: 1. Show how International Machines determined the $16,000 quarterly lease payments. 2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2024, and the second lease payment on April 1, 2024arrow_forward
- On 1 January 20X1, Dynamic entered into a three year lease for a lorry. Lease payments are $10,000 per year for the first two years and $15,000 for the third year. All payments are due at the end of the year. The present value of the lease payments was $31,552, and Dynamic incurred initial direct costs of $3,000. Dynamic's rate of borrowing is 5%. Prepare extracts from Dynamic's financial statements in respect of the lease agreement for the year ended 31 December 20X1.arrow_forwardMarie Company grants Lyn Company first three months rent-free under a three-year operating lease. The lease is effective April 1, 2021 and provides for a monthly rental of P12,000, payment of which will begin on July 1, 2021. How much is the rent income reported in Marie Company’s profit or loss for the year ended December 31, 2021? 99,00072,000144,000108,000arrow_forwardRecording Sales-Type Lease, Purchase Option-Lessor Flint Company leased equipment to Land Company for a five-year period. Flint paid $112,716 for the equipment, which equals its current carrying value (with estimated useful life of five years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The first payment was received on January 1 of Year 1, and Flint's accounting periods end on December 31. The lease contract contains a purchase option stating that Land Company can purchase the equipment for $9,600 on January 1 of Year 6, at which time its residual value is estimated to be $15,600. It is reasonably certain that Land Company will exercise the purchase option at the end of the lease term. a. Compute the annual payment calculated by the lessor. • Note: Round answer to the nearest dollar. • Note: Do not use a negative sign with your answer. $ 26,139 Xarrow_forward
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