Oxana Electronics is a financing business, leasing equipment to various entities. It acquired an equipment for a cost of P2,300,000. It immediately leased the equipment to Sushmita & Co. on January 1, 2020. Lease term is 6 years, and after the end of the lease term, title will transfer to the lessee. Annual lease payments are made at the start of each year, starting January 1, 2020. The machine’s residual value is P200,000. Implicit rate of the lease is 12%. Below PV factors are provided in relation to the implicit rate: · PV of annuity in advance at 12% for 6 periods: 4.60 · PV of 1 at 12% for 6 periods: 0.51 How much is the annual rental? a. 477,826 b. 500,000 c. 559,610 d. 460,000

Oxana Electronics is a financing business, leasing equipment to various entities. It acquired an equipment for a cost of P2,300,000. It immediately leased the equipment to Sushmita & Co. on January 1, 2020. Lease term is 6 years, and after the end of the lease term, title will transfer to the lessee. Annual lease payments are made at the start of each year, starting January 1, 2020. The machine’s residual value is P200,000. Implicit rate of the lease is 12%. Below PV factors are provided in relation to the implicit rate: · PV of annuity in advance at 12% for 6 periods: 4.60 · PV of 1 at 12% for 6 periods: 0.51 How much is the annual rental? a. 477,826 b. 500,000 c. 559,610 d. 460,000

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
Angelo Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P2,300,000. On January 1, 2020, Angelo Company leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual payment are due each January 1 and the first payment was made on January 1, 2020. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is earned by Angelo Company. 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?
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
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? P 500,000 P 477,826 P 559,610 P 460,000
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
Pam D. Corp. decided to enter the leasing business. Dumbrique acquired a specialized packaging machine for P2,300,000. 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 P200,000. The lease term are arranged so that a return of 12% is earned by the lessor. The PV of 1 at 12% for six periods is 0.51, the PV 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 39. What is the annual lease payment payable in advance required to yield the desired return?40. What is the total financial revenue?
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…
Telor, a private company that follows ASPE, entered into a lease agreement with Global Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Telor 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 Global 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. Telor does not know the implicit rate of the lease; Telor's incremental borrowing rate is 10%. Telor 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 Telor. Round amounts to the nearest dollar.
Sunland Company specializes in leasing large storage units to other businesses. Sunland entered a contract to lease a storage unit to Riskey, Inc. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was $13,000 at the commencement of the lease on January 1, 2020. The present value of the five equal rental payments of $3,481 at the start of each year, plus the present value of a guaranteed residual value of $1,000, equals the fair value of $13,000, Sunland’s implicit rate of return on the lease of 9%. The following is a correct, complete amortization schedule created by Sunland. Date Lease Payment Interest (9%) onOutstanding Lease Receivable Reduction ofLease Receivable Balance ofLease Receivable 1/1/20 $13,000 1/1/20 $3,481 $3,481 9,519 1/1/21 3,481 $857 2,624 6,895 1/1/22 3,481 621 2,860 4,035 1/1/23…
Saludares Company leased a machinery on January 1, 2021 with the following information: Annual rental payable at the end of each year is P1,000,000. A P300,000 payment is made to the lessor to obtain a long-term lease. At the end of the lease term, dismantling and restoring the machinery is required by contract. The present value of this obligation is P330,000. Annual executory costs paid by the lessee amount to P50,000. Lease term is 4 years and the useful life of the machinery is 8 years. The implicit rate is 10%. The PV of an ordinary annuity of 1 at 10% for 4 periods is 3.17 and the PV of 1 at 10% for 4 periods is 0.68. 1. What is the depreciation for 2021?2. What is the lease liability on December 31, 2021?
Crane Company specializes in leasing large storage units to other businesses. Crane entered a contract to lease a storage unit to Riskey, Inc. for 4 years when that particular storage unit had a remaining useful life of 5 years. The fair value of the unit was $12,000 at the commencement of the lease on January 1, 2020. The present value of the five equal rental payments of $3,002 at the start of each year, plus the present value of a guaranteed residual value of $1,000, equals the fair value of $12,000, Crane’s implicit rate of return on the lease of 5%. The following is a correct, complete amortization schedule created by Crane. Date Lease Payment Interest (5%) onOutstanding Lease Receivable Reduction ofLease Receivable Balance ofLease Receivable 1/1/20 $12,000 1/1/20 $3,002 $3,002 8,998 1/1/21 3,002 $450 2,552 6,446 1/1/22 3,002 322 2,680 3,766 1/1/23 3,002…