Barclay Company leased equipment with a fair value of $105,000 from Barry Lease Corp on December 31, 2024 over a 6-year lease. Lease paymens of $20,000 are due at the beginning of each lease period beginning December 31, 2024. Barclay's incremental borrowing rate is 11% and is aware that Barry's implicit rate in the lease is 10%. The following present value factors are provided: \table[[PV of an annuily due for 6 periods at 11%, 4.6959], [PV of an annuily due for 6 periods at 10%, 4.7908]] On December 31, 2024, what is the balance in the Lease Liability account? A $95, 816 B. $75, 816 c. $85,000 D. $ 93918

Barclay Company leased equipment with a fair value of $105,000 from Barry Lease Corp on December 31, 2024 over a 6-year lease. Lease paymens of $20,000 are due at the beginning of each lease period beginning December 31, 2024. Barclay's incremental borrowing rate is 11% and is aware that Barry's implicit rate in the lease is 10%. The following present value factors are provided: \table[[PV of an annuily due for 6 periods at 11%, 4.6959], [PV of an annuily due for 6 periods at 10%, 4.7908]] On December 31, 2024, what is the balance in the Lease Liability account? A $95, 816 B. $75, 816 c. $85,000 D. $ 93918

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 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
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.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.
Lessee Accounting Issues 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 the 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 bargain 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. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.
On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales - type lease designed to earn Lesco a 12% rate of return for providing long-term financing. The lease agreement specified: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Ten annual payments of $56, 000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $322,741. The lease qualifies as a finance lease/sales - type lease. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $56,000 payments is an insurance premium of…
On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn Lesco a 14% rate of return for providing long-term financing. The lease agreement specified: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1). a. Ten annual payments of $59,000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $321,104. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $59,000 payments is an insurance premium…
Big Bucks leased equipment to Shannon Company on July 1, 2021. The lease payments were calculated to provide the lessor a 9% return. Ten annual lease payments of $39,000 are due each July 1, beginning July 1, 2021. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be a finance lease. 2. Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be an operating lease. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries to record the lease by Shannon at July 1, 2021, and at December 31, 2021, the end of the reporting period. Consider this to be an operating lease. (If no entry is required for a…
Lazy Company leased an equipment with useful life of 6 years on January 1, 2020 for period of 5 years with fixed annual rental of P600,000 which is to be paid at the end of each year. The lease contract provides that the lessee has guaranteed a P100,000 residual value of the leased asset. The implicit interest rate in the lease is 10%. REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
Big Bucks leased equipment to Shannon Company on July 1, 2018. The lease payments were calculated to provide the lessor a 8% return. Eight annual lease payments of $40,0o00 are due each July 1, beginning July 1, 2018. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entries to record the lease by Shannon at July 1, 2018, and at December 31, 2018, the end of the reporting period. Consider this to be a finance lease. 2. Prepare the journal entries to record the lease by Shannon at July 1, 2018, and at December 31, 2018, the end of the reporting period. Consider this to be an operating lease. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries to record the lease by Shannon at July 1, 2018, and at December 31, 2018, the end of the reporting period. Consider this to be a finance lease. (If no entry is required for a…
On January 1, 2021, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Ten annual payments of $66,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $386,023. The lease qualifies as a finance lease/sales-type lease. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2021. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $66,000 payments is an insurance premium of $4,000…
ABC Co. is engaged in the leasing business. As a lessor, ABC expects a 12% return. At the end of the lease term, the leased asset will revert to ABC Co. On Jan. 1, 2022, an equipment is leased to another entity under a direct financing lease. The following are the terms of the lease: Cost of equipment to ABC-P4.4M Unguaranteed residual value - P320,000; Annual rental payable in advance - P767,600; Useful life and lease term- 8 years: Interest rate implicit in the lease - 12% First lease payment - January 1, 2022 PV factors: PV of 1 at 12% for 8 periods - 0.40; PV of an ordinary annuity of at 12% for 8 periods - 4.97; PV of an ordinary annuity of 1 at 12% for 7 periods - 4.56 PV of an annuity of 1 in advance at 12% for 8 periods -5.56 What is the unearned interest income on January 1, 2022? 1,293,200 1,420,800 1,740,800 2,060,800 1,228,000