On January 1, 2018, Naw Corporation leased a piece of machinery from Hoffherr Machinery's. The lease is a(n) 10 year, non-cancellable lease that requires ease payments of $5,000 due at the beginning of each year. The lease has been determined to be a capital lease because at least one of the classification criteria has been met. Naw Corporation needs to determine the present value of the lease payments so that they can record the asset and the liability at ease inception. Hoffherr Machinery's implicit rate of 10% is known to Naw Corporation. Complete the following from the perspective of Naw Corporation. Which of the following financial statement items is impacted in this transaction? The problem is solving for: The calculation involves: Excel® Formula Variables = Total asset asset = asset = cash PV To record the inception of the lease PV 33795 Accounts To record the first lease payment ( ( Rate .1 Date of Delivery Debit . 33795 5000 Leases Obligation Present Value An Annuity Due Nper 10 EXCEL Credit F 33795 5000 Pmt -5000 " FV 0 . " Type 1 )

On January 1, 2018, Naw Corporation leased a piece of machinery from Hoffherr Machinery's. The lease is a(n) 10 year, non-cancellable lease that requires ease payments of $5,000 due at the beginning of each year. The lease has been determined to be a capital lease because at least one of the classification criteria has been met. Naw Corporation needs to determine the present value of the lease payments so that they can record the asset and the liability at ease inception. Hoffherr Machinery's implicit rate of 10% is known to Naw Corporation. Complete the following from the perspective of Naw Corporation. Which of the following financial statement items is impacted in this transaction? The problem is solving for: The calculation involves: Excel® Formula Variables = Total asset asset = asset = cash PV To record the inception of the lease PV 33795 Accounts To record the first lease payment ( ( Rate .1 Date of Delivery Debit . 33795 5000 Leases Obligation Present Value An Annuity Due Nper 10 EXCEL Credit F 33795 5000 Pmt -5000 " FV 0 . " Type 1 )

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 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).
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.
On January 1, 2023, Riverbed Ltd., a private company following ASPE, leased a building to Candle Corp. for a ten-year term at an annual rental of $86500. At the inception of the lease, Riverbed received $346000 covering the first two years rent of $173000 and a security deposit of $173000. This deposit will NOT be returned to Candle upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $346000 should be shown as a current and long-term liability, respectively, in Riverbed's December 31, 2023 statement of financial position? Current Liability. Long-term Liability $0 $346000 $86500 $173000 $173000 $173000 $173000 $86500
On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $17,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $15,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…
On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $22,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $20,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…
Gopher Company leased an asset from Harry Company on December 31, 2018, with payments of $62,000 due each December 31 for six years, starting on December 31, 2018. The asset will be returned to Harry Company at the end of the lease term. Gopher has determined that none of the five lease classification criteria are met, so Gopher will classify the lease as an operating lease. Gopher's fiscal year ends on December 31. With these lease payments and Harry's implicit rate of 9%, the right-of-use asset is originally calculated to be $303,158. Make all of Gopher's journal entries for this lease for the following dates (clearly labeling each entry by date): December 31, 2019 and December 31, 2020 (while you are not asked to make the journal entries for December 31, 2018, you should consider them). Show your work.
On January 1, 2023, Murray Manufacturing leased a building for use in its operations from Associated Realty. The 7-year, noncancellable lease requires annual lease payments of $22,000, beginning January 1, 2023, and at each December 31 thereafter through 2028.The lease payment includes costs related to property taxes of $2000. They also include payments for common area maintenance. The observable standalone price for the lease (including the property taxes) is $20,000 and the observable standalone price for the common area maintenance is $4000.In addition, Murray agrees to pay insurance on the building. Murray pays the insurance each year when it receives an invoice from Associated Realty for the insurance amount. On December 15, 2023, Murray was billed and paid $2500 for this insurance. Murray does not make the election to account for each separate lease component, along with its associated nonlease components, as a single lease component.The lease agreement does not transfer…
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return?
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return? A.P 500,000 B.P 477,826 C.P 559,610 D.P 460,000
Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.
On January 1, 2025, Wildhorse, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Pina Warehouse Company. Collectibility of the lease payments is reasonably predictable and no important uncertainties surround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement: (a) The agreement requires equal rental payments at the beginning of each year. (b) The fair value of the building on January 1, 2025 is $5850000; however, the book value to Pina is $4800000. (c) The building has an estimated economic life of 10 years, with no residual value. Wildhorse depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Wildhorse's incremental borrowing rate is 12% per year. Pina Warehouse Co. set the annual rental to ensure a 10% rate of return. The implicit rate of the lessor is known by Wildhorse, Inc. (f) In…
Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2020, to lease electronic equipment to Wai Corporation, which also uses IFRS 16. The term of the non-cancellable lease is two years and payments are required at the end of each year. The following information relates to this agreement. 1. Wai Corporation has the option to purchase the equipment for $12,800 upon the termination of the lease and this option is reasonably certain to be exercised. 2. The equipment has a cost and fair value of $180,000 to Oriole Leasing Corporation. The useful economic life is two years, with a residual value of $12,800. 3. Wai Corporation is required to pay $5,400 each year to the lessor for insurance costs. 4. Oriole Leasing Corporation wants to earn a return of 10% on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by the…