On January 1, 2020, Marin Company contracts to lease equipment for 5 years, agreeing to make a payment of $150,642 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $618,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Marin's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Marin. Title to the equipment transfers to Marin at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables.

On January 1, 2020, Marin Company contracts to lease equipment for 5 years, agreeing to make a payment of $150,642 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $618,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Marin's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Marin. Title to the equipment transfers to Marin at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables.

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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
On January 1, 2020, Wildhorse Company contracts to lease equipment for 5 years, agreeing to make a payment of $151,860 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $623,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective interest basis. Wildhorse's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Wildhorse. Title to the equipment transfers to Wildhorse at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (b) Prepare the journal entries that Wildhorse should record on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts Round present value factor calculations to 5 decimal places, eg.…
On January 1, 2022, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $120,987 at the beginning of each year, starting January 1, 2022. The leased equipment is to be capitalized at $550,000. The asset is to be amortized on a straight-line basis, and the obligation is to be reduced on an effective-interest basis. Cage's incremental borrowing rate is 6%, and the company knows that the implicit rate in the lease is 5%. Title to the equipment transfers to Cage at the end of the lease. The asset has an estimated useful life of 8 years and no residual value. Instructions a. Explain the probable relationship of the $550,000 amount to the lease arrangement. b. Prepare the journal entry or entries that Cage should record on January 1, 2022. c. Prepare the journal entries to record depreciation of the leased asset and interest expense for the year 2022. d. Prepare the journal entry to record the lease payment of January 1, 2023, assuming reversing entries are…
On January 1, 2025, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.
On January 1, 2025, Splish Company contracts to lease equipment for 5 years, agreeing to make a payment of $128,104 at the beginning of each year, starting January 1, 2025. The leased equipment is to be capitalized at $572,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Splish's incremental borrowing rate is 7%, and the implicit rate in the lease is 6%, which is known by Splish. Title to the equipment transfers to Splish at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (f) What is the value of the lease liability if Splish also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments? (Round answers to O decimal places, eg. 5,275.) Lease liability $
On January 1, 2020, Sarasota Company contracts to lease equipment for 5 years, agreeing to make a payment of $140,532 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $586,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Sarasota’s incremental borrowing rate is 6%, and the implicit rate in the lease is Unresolved%, which is known by Sarasota. Title to the equipment transfers to Sarasota at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.Click here to view factor tables. Prepare the journal entries that Sarasota should record on January 1, 2020. Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2020. Prepare the journal entry to record the lease payment of January 1, 2021, assuming reversing entries are not made. What amounts…
On January 1, 2019, Cage Company contracts to lease equipment for 5 years, agreeing to make a payment of $120,987 at the beginning of each year, starting January 1, 2019. The leased equipment is to be capitalized at $550,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Cage's incremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known by Cage. Title to the equipment transfers to Cage at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Instruction a. Explain the probable relationship of the $550,000 amount to the lease arrangement.
On January 1, 2020 Warner Company contracts to lease equipment for 5 years, agreeing tomake a payment of $120,987 at the beginning of each year, starting January 1, 2020. The leasedequipment is to be capitalized at $550,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Warner'sincremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known byWarner. Title to the equipment transfers to Warner at the end of the lease. The asset has anestimated useful life of 5 years and no residual value. 4. Prepare the journal entry to record the lease payment of January 1, 2021, assumingreversing entries are not made.5. What amounts will appear on the lessee's December 31, 2020, balance sheet relative tothe lease contract?6. How would the value of the lease liability in part 2 change if Warner also agreed to paythe fixed annual insurance on the equipment of $2,000 at the same time as the…
On January 1, 2020 Warner Company contracts to lease equipment for 5 years, agreeing tomake a payment of $120,987 at the beginning of each year, starting January 1, 2020. The leasedequipment is to be capitalized at $550,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Warner'sincremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known byWarner. Title to the equipment transfers to Warner at the end of the lease. The asset has anestimated useful life of 5 years and no residual value.1. Explain the probable relationship of the $550,000 amount to the lease arrangement.2. Prepare the journal entry or entries that Warner should record on January 1, 2020.3. Prepare the journal entries to record amortization of the leased asset and interestexpense for the year 2020.4. Prepare the journal entry to record the lease payment of January 1, 2021, assumingreversing entries are not…
Martinez Equipment Leasing Company leased equipment to Cullumber Healthcare System on January 1, 2025, for a four-year period. Equal annual payments under the lease are $370000 and are due on January 1 of each year. The first payment was made on January 1, 2025. The implicit rate of interest contemplated by Martinez Equipment Leasing and known to Cullumber Healthcare is 8%. Cullumber's incremental borrowing rate is 12%. The cost of the equipment on Martinez Equipment Leasing accounting records was $820000. Assuming that the lease is appropriately recorded as an operating lease, at what amount is the lease recorded on Cullumber Healthcare System's books on January 1, 2025? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 4 periods 3.57710 3.31213 0.73503 12%, 4 periods 3.40183 3.03735 0.63552 no entry to record an operating lease. $1323527 $1480000 $789167
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