Pharoah Co. purchases land and constructs a service station and car wash for a total of $480000. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $520000 and immediately leased from the oil company by Pharoah. Fair value of the land at time of the sale was $48000. The lease is a 10-year, noncancelable lease. Pharoah uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Pharoah at termination of the lease. A partial amortization schedule for this lease is as follows:     Payments   Interest   Amortization   Balance Jan. 2, 2021       $520000.00 Dec. 31, 2021 $84627.61 $52000.00 $32627.61 487372.39 Dec. 31, 2022 84627.61 48737.24 35890.37 451482.02

Crane Co. purchases land and constructs a service station and car wash for a total of $532500. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $590000 and immediately leased from the oil company by Crane. Fair value of the land at time of the sale was $58500. The lease is a 10-year, noncancelable lease. Crane uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Crane at termination of the lease. A partial amortization schedule for this lease is as follows:     Payments   Interest   Amortization   Balance Jan. 2, 2021       $590000.00 Dec. 31, 2021 $96019.78 $59000.00 $37019.78 552980.22 Dec. 31, 2022 96019.78 55298.02 40721.76 512258.46 Dec. 31, 2023 96019.78 51225.85 44793.93 467464.53 What is the amount of the…

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 $171,000 (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 9 years, the asset does have an expected residual value at the end of the lease term of $4,666. Crescent seeks a 8% 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: 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. What will be the…

Blossom, Inc. leases a piece of equipment to Wildhorse Company on January 1, 2025. The contract stipulates a lease term of 5 years, with equal annual rental payments of $8,880 at the end of each year. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. The asset has a fair value of $48,000, a book value of $43,000, and a useful life of 8 years. At the end of the lease term, Blossom expects the residual value of the asset to be $12,000, and this amount is guaranteed by a third party. Assuming Blossom wants to earn a 5% return on the lease and collectibility of the lease payments is probable, record its journal entry at the commencement of the lease on January 1, 2025. (List all debit entries before credit entries. Credit account titles are automatically

Cullumber Co. purchases land and constructs a service station and car wash for a total of $487500. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $560000 and immediately leased from the oil company by Cullumber. Fair value of the land at time of the sale was $56000. The lease is a 10-year, noncancelable lease. Cullumber uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Cullumber at termination of the lease. A partial amortization schedule for this lease is as follows:     Payments   Interest   Amortization   Balance Jan. 2, 2021       $560000 Dec. 31, 2021 $91137.42 $56000 $35137.42 524862.58 Dec. 31, 2022 91137.42 52486.26 38651.16 486211.42 Dec. 31, 2023 91137.42 48621.14 42516.28 443695.14 What is the…

At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $24,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $162,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $52,070.) Crescent seeks a 12% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What will be the effect of the lease on Café Med's earnings for the first year (ignore taxes)? (Enter decreases with negative sign.) 2. What will be…

King Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $52,538 over a six-year lease term (also the asset’s useful life), with the first payment at January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $230,000 to produce. Required:1. Determine the price at which the lessor is “selling” the asset (present value of the lease payments).2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)?

On January 1, 2018, Sauder Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Sauder to make annual payments of $200,000 at the beginning of each year for five years beginning on January 1, 2018 with the title passing to Sauder at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sauder uses the straight-line method of depreciation for all of its fixed assets. The minimum lease payments were determined to have a present value of $833,972 at an effective interest rate of 10%. What type of lease would this be for Sauder?

At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $28,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $207,000 (its fair value) and was expected to have a useful life of 13 years with no salvage value at the end of its life. (Because the lease term is only 9 years, the asset does have an expected residual value at the end of the lease term of $69,847.) Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be an operating lease. (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. What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? (Enter decreases with negative sign.)2. What will be…