f) On January 1, 2022, Fall Company leased some equipment for $250,000. They made the first of fivepayments of $57,976 on that day. The bookkeeper incorrectly recorded the transaction as follows on January 1:$57,976Lease expenseCash$57,976g) Accrue annual interest expense on the lease in (f) at 8%.h) Amortize the lease in (f) over five years. Fall Corporation's capital structure consists of 500,000 authorized shares of common stock, of which 100,000have been issued and are still outstanding. At December 31, 2022, an analysis of the accounts and discussionswith company officials revealed the following information:Accounts payable......Accounts receivable (trade accounts).Accumulated depreciation.....Accumulated other comprehensive income.Allowance for uncollectible accounts.Amortization expense..Cash.......Common stock ($1 par value)Cost of goods soldDeferred revenue..Depreciation expense.Dividend revenue..Fair value adjustment (trading securities - debit balance).Gain on investments (Unrealized, NI)....General and administrative expenses.Interest expense...Interest payable.....Inventory, December 31, 2022.Investments in trading securities (cost)...Land held for future plant site....4% Notes payable (maturity 7/1/26 - $40,000 due July 1, 2023)...Paid in capital in excess of par..Patents......Pension plan assets.Projected benefit obligation..Property, Plant & Equipment..Retained earnings, January 1, 2022.Sales revenue.Sales discounts forfeited.Selling expenses.50,000325,000160,000(10,000)16,00012,000459,300100,0001,560,000156,00040,0005,00050,000..80,000350,00010,0004,000.222,000180,000.824,700200,000280,000228,0001,000,000.800,000..664,000.622,000$4,000,00012,000550,000

A lease is defined as a contractual agreement incorporated between two business entities where one…

f) On January 1, 2022, Fall Company leased some equipment for $250,000. They made the first of five payments of $57,976 on that day. The bookkeeper incorrectly recorded the transaction as follows on January 1: $57,976 Lease expense Cash $57,976 g) Accrue annual interest expense on the lease in (f) at 8%. h) Amortize the lease in (f) over five years.

f) On January 1, 2022, Fall Company leased some equipment for $250,000. They made the first of five payments of $57,976 on that day. The bookkeeper incorrectly recorded the transaction as follows on January 1: $57,976 Lease expense Cash $57,976 g) Accrue annual interest expense on the lease in (f) at 8%. h) Amortize the lease in (f) over five years.

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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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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.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for the years 2019 and 2020.
On January 1, 2021, the lessee company signed an operating lease to lease a building from the lessor. The lease arrangement is for 8 years. Lease payments are $168,000 per year and are made at the beginning of the year. The lessee incurred initial direct costs of $65,000. Assume the following is the partial Lease Amortization Schedule (with only two rows and three columns shown) prepared by the lessee company: Date Annual Payment Interest on Liability 1/1/2022 168,000 40,000 1/1/2023 168,000 36,000 In the journal entry made on December 31, 2022, the lessee company should debit/credit Right-of-Use Asset by $___________. (Just enter the amount. Do not put a plus or minus sign in front of the amount.)
On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: January 1 Payments $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 2024 2025 2026 2027 2028 2029 2030 2041 2042 2043 $ 22,000 $ 22,000 $ 22,000 Effective Interest $ 18,403 $ 18,043 $ 17,647 $ 17,212 1. Lease liability 2. Right-of-use asset 3. Lease term $ 16,733 $ 16,207 $ 5,471 $ 3,818 $ 2,000 Decrease in Balance $ 22,000 $ 3,597 $ 3,957 $ 4,353 $ 4,788 $ 5,267 $ 5,793 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense $ 16,529 $ 18,182 $ 20,000 Outstanding Balance $ 206,028 $ 184,028 $ 180,431 $ 176,474 $ 172, 121 $ 167,333 $ 162,067 $ 156,273 Required: 1. What is Majestic's lease liability at the…
On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance 291,599 2021 27,500 27,500 264,099 2022 27,500 21,128 6,372 257,727 2023 27,500 20,618 6,882 250,845 2024 27,500 20,068 7,432 243,413 2025 27,500 19,473 8,027 235,386 2026 27,500 18,831 8,669 226,717 2027 27,500 18,137 9,363 217,354 — — — — — — — — — — — — — — — 2038 27,500 5,670 21,830 49,040 2039 27,500 3,923 23,577 25,463 2040 27,500 2,037 25,463 0 Required:1. What is Majestic’s lease liability after the first lease payment??2.…
O On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance $ 314,048 2024 $ 24,000 $ 24,000 $ 290,048 2025 $ 24,000 $ 14,502 $ 9,498 $ 280,550 2026 $ 24,000 $ 14,028 $ 9,972 $ 270,578 2027 $ 24,000 $ 13,529 $ 10,471 $ 260,107 2028 $ 24,000 $ 13,005 $ 10,995 $ 249,112 2029 $ 24,000 $ 12,456 $ 11,544 $ 237,568 2030 $ 24,000 $ 11,878 $ 12,122 $ 225,446 — — — — — — — — — — — — — — — 2041 $ 24,000 $ 11,272 $ 12,728 $ 44,627 2042 $ 24,000 $ 2,231 $ 21,769 $ 22,858 2043 $ 24,000 $ 1,143 $ 22,857 $ 0 Required: What is Majestic’s lease liability at the beginning of the lease (after the first payment)? What…
On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: Jan. 1 Payments Effective Interest Decrease in Balance Outstanding Balance 208,952 2021 21,000 21,000 187,952 2022 21,000 16,916 4,084 183,868 2023 21,000 16,548 4,452 179,416 2024 21,000 16,147 4,853 174,563 2025 21,000 15,711 5,289 169,274 2026 21,000 15,235 5,765 163,509 2027 21,000 14,716 6,284 157,224 — — — — — — — — — — — — — — — 2038 21,000 4,784 16,216 36,940 2039 21,000 3,325 17,675 19,264 2040 21,000 1,734 19,266 0 Required:1. What is Majestic’s lease liability after the first lease payment??2.…
Accounting On January 1, 2020, ABC Company (lessee) leased a machine from Bank XYZ under a 12-month lease. ABC did not record a Right of Use Asset for this agreement. The lease requires ABC to make a single total annual payment of $24,000 on January 1, 2020. The machine was purchased by XYZ Bank on January 1, 2020 at a cost of $70,000 and is expected to have a useful life of 5 years with no expected residual value. Request: Prepare the proper journal entries for lessee ABC (Be sure to show all calculations to receive full punctuation) 1.Journal entry for 1/1/20 2. Journal Entries for 12/31/20
Sandhill Co. as lessee records a finance lease of machinery on January 1, 2021. The seven annual lease payments of $772,000 are made at the end of each year. The present value of the lease payments at 11% is $3,638,000. Sandhill uses the effective-interest method of amortization and sum-of-the-years'-digits depreciation (no residual value). (a) Prepare an amortization table for 20121 and 2022. Sandhill Co.Lease Amortization Schedule Date Annual LeaseReceipt/Payment Interest onReceivable/Liability Reduction inReceivable/Liability LeaseReceivable/Liability 1/1/21 $ 12/31/21 $ $ $ 12/31/22
On December 31, 2020, Akainu Company, a lessor, actually sold a machinery that it had been leasing under a sale type lease. On January 1, 2020 after receipt of the lease payment for the year, the following account balances were associated with lease: Gross lease receivable 5,850,000 Unearned interest income 1,000,000 The interest rate implicit in the lease is 10%. On December 31, 2020, Akainu Company actually sold the leased machinery to the lessee for P 3,250,000 cash. What is the carrying amount of the lease receivable on December 31, 2020? Show your solution.