Lessor Corporation, a manufacturer of equipment, enters into a lease of specialized equipment with Lessee Corp. on January 1 of Year 1. Title to the asset remains with Lessor Corp. at the end of the lease. Lessee Corp. does not guarantee the residual value of the specialized equipment at the end of the lease term, and the lease contains no renewal or purchase options. The following information pertains to the lease. Lease term Economic life of the leased equipment Annual lease payments Payment date (first payment due at lease commencement) Fair value of the leased equipment Lessor Corp's carrying value of the leased equipment Rate implicit in the lease (known by lessee) Estimated fair value of the equipment at the end of the lease term Required a. Determine the classification of the lease for Lessee Corporation. t Lease Liability Schedule 5 years 6 years $2,614 Annually on Jan. 1 $11,440 $9,900 10.03% $880 Journal Entries b. Prepare a schedule of the lease liability for the first two years of the lease term. . Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

Lessor Corporation, a manufacturer of equipment, enters into a lease of specialized equipment with Lessee Corp. on January 1 of Year 1. Title to the asset remains with Lessor Corp. at the end of the lease. Lessee Corp. does not guarantee the residual value of the specialized equipment at the end of the lease term, and the lease contains no renewal or purchase options. The following information pertains to the lease. Lease term Economic life of the leased equipment Annual lease payments Payment date (first payment due at lease commencement) Fair value of the leased equipment Lessor Corp's carrying value of the leased equipment Rate implicit in the lease (known by lessee) Estimated fair value of the equipment at the end of the lease term Required a. Determine the classification of the lease for Lessee Corporation. t Lease Liability Schedule 5 years 6 years $2,614 Annually on Jan. 1 $11,440 $9,900 10.03% $880 Journal Entries b. Prepare a schedule of the lease liability for the first two years of the lease term. . Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following information relates to Wilson, Inc.’s equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $91,200 Lease term, 4 years Economic life of property, 5 years Implicit interest rate, 6% Annual lease payment due on December 31, $25,600 Present value of the lease payments, $88,707 The equipment reverts back to the lessor at the end of the lease term. How much is interest expense on the lease for the first year? Select one: a. $5,472 b. $2,736 c. $5,322 d. $1,331
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he following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Ivanhoe Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $99,118 Residual value of equipment at end of lease term, guaranteed by the lessee $53,000 Expected residual value of equipment at end of lease term $48,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $554,000 Lessor’s implicit rate 6 % Lessee’s incremental borrowing rate 6 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. (a) Your answer is partially correct. Try again. Prepare an amortization schedule that would be suitable for the lessee for the lease term.…