On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. • Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $23,000 due on December 31 of each year, calculated by the lessor using a 7% discount rate. • The expected useful life of the asset is nine years, and its fair value is $172,500. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 8%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. View transaction list Journal entry worksheet 1 2 3 Record the entry, if any, by the lessee to account for the reassessment. Note: Enter debits before credits. Date January 01, 2026 General Journal Debit Credit Record entry Clear entry View general journal > Show less▲

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On December 31, 2021, Perry Corporation leased equipment to Admiral Company for a five-year period. The annual lease payment, excluding non-lease components, is $46,000. The interest rate for this lease is 12%. The payments are due on December 31 of each year. The first payment was made on December 31, 2021. The normal cash price for this type of equipment is $155,000 while the cost to Perry was $129,000. For the year ended December 31, 2021, by what amount will Perry's earnings increase due to this lease (ignore taxes)?   a) 36,000 b) 39,000 c) 26,000 d) 16,000

On January 1, 2021, Rick's Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the 3-year extension option. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate. Assume that at the beginning of the third year, January 1, 2023, Rick's had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." The relevant interest rate at that time was 6%. (FV of $1, PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry, if any, at the beginning of the third year for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, at the…

American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below. Req 1 1 Req 2 Prepare the appropriate entries related to the lease…

Manji

American Food Services, Incorporated leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. The lease agreement for the $5.6 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. Barton and Barton's implicit interest rate was 10%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2024. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2024 and 2026. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 and 4 Prepare an amortization schedule for…

Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years.  Annual lease payments are $21,000, payable at the beginning of each lease year.  Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation.  The normal useful life of the warehouse is 10 years.  At the time of the lease, the warehouse could be purchased for $108,000.  Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%.  Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease.  Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc.  Round amounts to the nearest…

Braun Company acquired a piece of equipment from Tipper Company under a lease agreement. The lease requires six annual lease payments of $35.000 with the first payment due when the lease begins, on January 1, 2020. Future lease payments are due on January 1 of each year of the lease term. The interest rate in the lease is 10%. What amount should Braun Company debit the equipment account on the date of acquisition. Round answer to the nearest dollar). $225,000 $32.678 $167,678 O$152434 Braun Company would not debit the equipment account because the equipment is being cased and not purchased.

At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. • The lease agreement specifies annual payments of $25,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. • Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $50,995. • Crescent seeks a 10% return on its lease investments. ● By this arrangement, the lease is deemed to be a finance lease. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. 2. What…