Sugar Co leased a machine from Spice Co. The terms of the lease are as follows: Inception of lease 1 January 20X1 4 years at $78,864 per annum payable in arrears Lease term Present value of minim. lease payments $250,000 Useful life of asset 4 years Required (a) Calculate the interest rate implicit in the lease, using the table below This table shows the present value of $1 per annum, receivable or payable at the end of each year for n years. Years (n) 1 2 3 4 5 6% 0.943 1.833 2.673 3.465 4.212 Interest rates 8% 0.926 1.783 2.577 3.312 3.993 10% 0.909 1.736 2.487 3.170 3.791 (b) Prepare the extracts from the financial statements of Sugar Co for the year ended 31 December 20X1.

Sugar Co leased a machine from Spice Co. The terms of the lease are as follows: Inception of lease 1 January 20X1 4 years at $78,864 per annum payable in arrears Lease term Present value of minim. lease payments $250,000 Useful life of asset 4 years Required (a) Calculate the interest rate implicit in the lease, using the table below This table shows the present value of $1 per annum, receivable or payable at the end of each year for n years. Years (n) 1 2 3 4 5 6% 0.943 1.833 2.673 3.465 4.212 Interest rates 8% 0.926 1.783 2.577 3.312 3.993 10% 0.909 1.736 2.487 3.170 3.791 (b) Prepare the extracts from the financial statements of Sugar Co for the year ended 31 December 20X1.

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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $14.000 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 42,000✔✔ 42,000 41,084 42,000✔ 41,084 X 41,084 X 2 45.070 X 47.600 45.070 X 1 $2,000✔ 41,084 X 41.084 X 3 3 12% $0 $0 Answer is complete but not entirely correct. Situation 3 none Purchase option: After (years) Exercise price Reasonably certain? 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) Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest…
On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. What total amount of finance income will Entity Y recognize over the lease term?
A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 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% FV of $1 PV of $1 FVA of PVA of $1, FVAD of $1 and PVAD of $t) (Use appropriate factor(s) from the tables provided.) 1 Required: a. Complete the amortization schedule for the first two payments b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Complete this question by entering your answers in the tabs below. Required A Required B Complete the amortization schedule for the first two payments. (Enter all amounts as positive values.) Lease Payment Effective Interest Decrease in Outstanding Date 01/01/2016 01/01/2016 01/01/2017 Balance Balance Required B >
A lease agreement that qualifies as a finance lease calls for annual lease payments of $50,000 over a four-year lease ferm (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 8%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its Income statement for the first year ended December 31 (ignore taxes)? Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 51) Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the present value of the lease upon the lease's inception. Note: Round your answers to nearest whole number and round percentage answer to 1…
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $15,000 are payable at the beginning of each year. Each is a finance lease for the lessee. (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.) Situation Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: After (years) Exercise price Reasonably certain? 3 5. 8% 8% 8% $ 6,000 $ 3,000 $ 3,000 $ 6,000 none 4 3. n/a $ 8,000 $ 2,000 $ 4,000 n/a по no yes Determine the following amounts at the beginning of the lease: (Round your final answers to nearest whole dollar.)
Fitbit Ltd has leased a machine on the following terms: Date of entering lease Duration of lease 1 July 2019 5 years Life of asset years Unguaranteed residual value Lease payments inception (at the start) Annual payments (5) Implied rate 11.0 % $40,000 $60,000 $65,000 Required: Determine the Fair Value (rounded off) of the leased asset. 27:S
A lease agreement that qualifies as a finance lease calls for annual lease payments of $26,269 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 59 F of $1. PV of $1, F A of $1 PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required a. Complete the amortization schedule for the first two payments. b. If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Complete this question by entering your answers in the tabs below Required A Required B If the lessee's fiscal year is the calendar year, what would be the amount of the lease liability that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? Lease liability Interest payable < Required…
A lease agreement that qualifies as a finance lease calls for annual lease payments of $25,000 over a six-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. Required: a. Determine the present value of the lease upon the lease's inception. b. Create a partial amortization table through the second payment on January 1, Year 2. c. If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)? 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) Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C If the lessee's fiscal year is the calendar year, what would be the amounts related to the lease that the lessee would report in its…
The following information relates to an equipment lease with an inception date of January 1: Fair value of equipment at lease inception, $56,000 Lease term, 5 years Economic life of property, 6 years Implicit interest rate, 7% Annual lease payment due on December 31, $13,200 The equipment reverts back to the lessor at the end of the lease term. How much is recorded as the lease liability on the lease inception date? Select one: a. $66,000 b. $56,000 c. $57,911 d. $54,123
Each of the four independent situations below describes a sales-type lease in which annual lease payments of $13,500 are payable at the beginning of each year. Each is a finance lease for the lessee. Lease term (years) Asset's useful life (years) Lessor's implicit rate (known by lessee) Residual value: Guaranteed by lessee Unguaranteed Purchase option: A. The lessor's: 1. Total lease payments 2. Gross investment in the lease 3. Net investment in the lease B. The lessee's: 4. Total lease payments 5. Right-of-use asset 6. Lease liability $ 1 67,500 2 Situation 1 67,500 5 5 11% $ 0 none 3 2 After (years) Exercise price Reasonably certain? 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) Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. 67,500 Situation 5 6 11% $ 5,400 $ 0 4 4 $ 7,700 no 3 5 6 11% $ 2,700 $ 2,700 5 $ 1,700 no 4 5 8 11% $0 $ 5,400 3 $…
A company acquired an item of plant under a finance lease on 1 April 20X7. The present value of the minimum lease payments was $15.6 million and the rentals are $6 million per annum paid in arrears for three years on 31 March each year. The interest rate implicit in the lease is 8% per annum. What amount will appear under current liabilities in respect of this lease in the statement of financial position at 31 March 20X8? A $5,132,000 B $5,716,000 C $6,000,000 D $4,752,000