Lessee Company leased a machine with an estimated useful life of 10 years from Lessor Company. The 5-year noncancelable lease provides that the title to the machine transfers to Lessee Company at the end of the lease term. Lessee Company accounted for the lease as a finance lease and recorded an asset and a liability in its accounting records. The leased asset should be depreciated by Lessee Company over

Lessee Company leased a machine with an estimated useful life of 10 years from Lessor Company. The 5-year noncancelable lease provides that the title to the machine transfers to Lessee Company at the end of the lease term. Lessee Company accounted for the lease as a finance lease and recorded an asset and a liability in its accounting records. The leased asset should be depreciated by Lessee Company over

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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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.
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 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.
An entity leased a new machine having an expected useful life of 12 years. the noncancelable lease term is 10 years and the entity may exercise a purchase option at the end of the lease term. The lease shall be capitalized by the entity and depreciated over 12 years 9 years 10 or 12 years at the entity's option 10 years
Lessee Company leased a machine with an estimated useful life of 15 years from Lessor Company. The 10-year non- cancellable lease provides that the title to the machine transfers to the Lessee Company at the end of the lease term. The leased asset should be depreciated by Lessee Company over
Ericson Company leased an asset to another entity. The o COst The lease provided for a transfer of title to the lessee at the of the asset was P7,994,000. Terms of the lease specify and four year-end rental payments. The lease qualified as a four-year life for the lease, an annual interest rate of 15%, direct financing lease... The lease provided for a transfer of title to the lessee end of the lease term. After the fourth year, the residual value was estimated P1,000,000. at The PV of 1 at 15% for 4 periods is .572, and the PV of a. ordinary annuity of 1 at 15% for 4 periods is 2.855. What is the annual rental payment? a. 2,000,000 b. 3,000,350 c. 2,800,000 d. 2,599,650
SLIGHTLY USED MEMORY leased a machine with an estimated useful life of 20 years from another company. The 10-year non-cancellable lease provides that the title to the machine transfers to SLIGHTLY USED MEMORY at the end of the lease term. The leased asset should be depreciated by SLIGHTLY USED MEMORY over a. 10 years b. 20 years c. 10 years or 20 years depending if the lessee classifies it as either operating or finance lease d. 10 years or 20 years depending if the lessor classifies it as either operating or finance lease
An entity leased a new machine having an expected useful life of 12 years. the noncancelable lease term is 10 years and the entity may exercise a purchase option at the end of the lease term. The lease shall be capitalized by the entity and depreciated over A)10 or 12 years at the entity's option B) 9 years C)10 years D)12 years
At the beginning of current year, an entity leased an equipment from a lessor with the following pertinent information: Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease bonus paid to lessor before commencement of the lease 300,000 Lease incentive received 100.000 Discounted amount of restoring building as required by contract 700,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of equipment…
On January 1. 2022, XYZ Lessee leased equipment from Standey Inc. Lessor, signing an Operating Lease with the folowing terms - Both the cost and the fair value of the asset for Stanley Inc. Lessor is $360,000 • Lease specifies 4 annual payments of S60,273 beginning January 1. 2022. and on each January 1 thereater trough 202s. The 4year tarm ends on December 31. 2026 - The asset's expected residual value at the end of the lease term (4 years) is $175,000, unguaranteed by the Lessee The expected useful life of the equipment is 7 years, and there is no expected residual value at the end of its useful ife There is no purchase option, and the equipment reverts back to the Lessor at the end of the 4-year period The implicit rate on the lease is 6%, and XYZ Lessee is aware of that rate. Assume Straight Line Depreciation is used on the Right of Use Asset. Present Value factors are the folowing PV of $1 79209 66506 PV of Annuity Due 3.67301 5.91732 n=7 6% Ar December 31. 2022. end of the first…
On 1 July 2023, Station Ltd leased machinery to Depot Ltd. The machinery was purchased by Station Ltd on 1 July 2023 for its fair value of $233,556. The lease agreement contained the following provisions: Lease term 3 years Economic life of machinery 5 years Annual rental payment, in arrears (commencing 30/6/2024) $75,000 Residual value at end of the lease term $45,000 Residual guaranteed by lessee $30,000 Interest rate implicit in lease 7% Depot Ltd incurred $1 200 in costs to negotiate the lease arrangement. Depot Ltd intends to return the machinery to the lessor at the end of the lease term. The reporting period ends 30 June. Required: Prepare a lease payment schedule for Depot Ltd. Prepare the journal entries for 1 July 2023 and 30 June 2024.
2. Gramwell International Ltd leased equipment from Lubsal Financial Group Ltd. The details are as follows: Start of Lease April 1, 2021 Lease term (non cancellable) 5 years Annual lease payment due at the end of each year beginning April 1, 2021 $142,500 Fair value of asset at April 1, 2021 $650,000 Economic life of leased equipment 7 years Residual value of equipment at end of lease term, unguaranteed by the lessee $126,350 Lessee’s incremental borrowing rate 8% The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line depreciation method for all equipment. (Round all figures to the nearest $1.) i) Calculate the lease liability for Gramwell International Ltd. ii) Prepare the journal entries for Gramwell International Ltd at the start of the lease on April 1, 2021. iii) Prepare the lease journal entries for Gramwell International Ltd for the year ended December 31, 2021. iv) Prepare the…