On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments of $47,500 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due every January 1, beginning January 1, 2019. 2. The fair value of the manufacturing equipment on January 1, 2019, is $150,000. The equipment has an economic life of 7 years. 3. Concord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term. Concord considers it probable that it will have to pay $5,000 cash at the end of the lease terms to satisfy this residual value guarantee. 4. Concord Corp. depreciates similar assets using the straight-line method. 5. Concord’s incremental borrowing rate is 12% per year; Stone’s implicit interest rate is 10% and known by Concord. 6. Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes directly to the applicable third party.   Required:     1. Prepare a table summarizing the lease payments and interest expense. 2. Prepare journal entries for Concord for the entire lease period. Assume that the equipment has a fair value of $11,500 at the end of the 3-year lease term.

JK Ltd enters into a non-cancellable five-year lease agreement with Burt Ltd on 1 July 2019. The lease is for an item of machinery that, at the inception of the lease, has a fair value of $647,192. The machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $105,000. There is a bargain purchase option that JK Ltd will be able to exercise at the end of the fifth year for $140,000. There are to be five annual payments of $175,000, the first being made on 30 June 2020. Included with $175,000 lease payments is an amount of $17,500 representing payment to the lessor for the insurance maintenance of the equipment. The equipment is to be depreciated on a straight-line basis. a. Determine the rate of interest implicit in the lease and calculate the present value of the lease payments. b. Prepare the journal entries in the books of JK Ltd for the years ending 30 June 2020 and 30 June 2021. c. Prepare the portion of the statement…

Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2020, is $700,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Glaus desires a 5% rate of return on its investments. Jensen's incremental borrowing rate is 6%, and the lessor's implicit rate is unknown. Instructions (Assume the accounting period ends on…

On January 1, 2021, Coronado Industries leased a building to Sandhill Co. for a ten-year term at an annual rental of $175000. At inception of the lease, Coronado received $701000 covering the first two years' rent of $350000 and a security deposit of $351000. This deposit will not be returned to Sandhill 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 $701000 should be shown as a current and long-term liability, respectively, in Coronado's December 31, 2021 balance sheet? Current Liability Long-term Liability   $350000 $175000 $175000 $350000 $0 $701000 $350000 $351000