FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- A-5arrow_forwardItem4 Item 4 At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $32,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $243,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $73,596.) Crescent seeks a 9% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. (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. Round your intermediate calculations to the nearest whole dollar amount.) Required:1. What will be the effect of the lease on Café Med’s…arrow_forwardExercise 15-5 (Static) Sales-type lease; lessor; balance sheet and income statement effects [LO15-3] On June 30, 2024, Georgia-Atlantic, Incorporated leased warehouse equipment from Builders, Incorporated. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.5 million. 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) Required: 1. Determine the price at which Builders is "selling" the equipment (present value of the lease payments) on June 30, 2024. 2. What amount related to the lease would Builders report in its balance sheet on December 31, 2024 (ignore taxes)? 3. What…arrow_forward
- Domesticarrow_forwardExercise 15-33 (Algo) Nonlease payments; lessor and lessee [LO15-2, 15-7] On January 1, 2024, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 11% rate of return for providing long-term financing. The lease agreement specified the following: Ten annual payments of $61,000 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 NRC was $346,464. 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 $8,000 per year are specified, beginning January 1, 2024. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. A partial amortization schedule, appropriate for both the lessee and lessor, follows: Note: Use…arrow_forwardDomesticarrow_forward
- E 15-16 Lessee; operating lease LO15-4 Baillie Power leased high-tech electronic equipment from Courtney Leasing on January 1, 2024. Courtney purchased the equipment from Doane Machines at a cost of $250,000, its fair value. Related Information: Lease term Quarterly lease payments Economic life of asset 2 years (8 quarterly perlods) $15,000 on Jan. 1, 2024, and on Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter 5 years Interest rate charged by the lessor 8% Required: Prepare appropriate entries for Baillie Power from the beginning of the lease through December 31, 2024. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter.arrow_forwardPart 4 Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2016. Edison purchased the equipment from International Machines at a cost of $252,812. Manufacturers Southern elected the short-term lease option. Appropriate adjusting entries are made annually. Related Information: Lease term Quarterly lease payments Economic life of asset Interest rate charged by the lessor Respond to the question with the presumption that the guidance provided by the proposed Accounting Standards Update is being applied. Required: 1 years (4 quarterly periods) $23,500 at Jan. 1, 2016, and at Mar. 31, June 30, Sept. 30. 5 years 8% Prepare appropriate entries for Manufacturers Southern from the beginning of the lease through December 31, 2016arrow_forward
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