FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Concept explainers
Question
Transcribed Image Text:Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decim
5,275.)
Date
1/1/20
1/1/20
1/1/21
1/1/22
1/1/23
1/1/24
1/1/25
12/31/26
Date
11
Annual Lease
Payment Plus GRV
Account Titles and Explanation
(To record the lease.)
(To record first lease payment.)
Prepare all of the journal entries for the lessee for and to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (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 0 for the amounts. Round answers to 0 decimal places e.g.
5,275. Record journal entries in the order presented in the problem.)
(To record interest.)
(To record amortization.)
►
LA
(To record interest.)
PHAROAH COMPANY (Lessee)
Lease Amortization Schedule
(To record second lease payment.)
(To record amortization.)
Interest on
Liability
Debit
+A
Credit
Reduction of Lease
Liability
101
Lease Liability
Transcribed Image Text:The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Pharoah Company, a lessee.
Commencement date
Annual lease payment due at the beginning of
each year, beginning with January 1,
Residual value of equipment at end of lease term,
guaranteed by the lessee
Expected residual value of equipment at end of lease term
Lease term
Economic life of leased equipment
Fair value of asset at January 1,
Lessor's implicit rate
Lessee's incremental borrowing rate
January 1,
$126,840
$55,000
$50,000
6 years
6 years
$653,000
9 %
9 %
The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by stepSolved in 4 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 2..new..B...continues The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Crane Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term, guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.Click here to view factor tables. Prepare all of the journal entries for the lessee for and to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual…arrow_forwardOwefix a. compute the amount of lease receiveable for the leaseb. discusd the bethre of the leasec. prepara an amoritization table for the lessee and lessorarrow_forward2...new.continue...c The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Crane Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $104,218 Residual value of equipment at end of lease term, guaranteed by the lessee $51,000 Expected residual value of equipment at end of lease term $46,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $540,000 Lessor’s implicit rate 9 % Lessee’s incremental borrowing rate 9 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment. Suppose Crane received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $enter a…arrow_forward
- Each of the four independent situations below describes a sales-type lease in which annual lease payments of $17,500 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: After (years) Exercise price Determine the following amounts at the beginning of the lease: Note: Round your final answers to nearest whole dollar. 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 70,000 2 Situation 1 70,000 4 4 8% $0 $0 none 3 2 70,000 Situation 4 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) 8% $ 7,000 $0 4 $ 8,500 no 4 5 8% $3,500 $ 3,500 $ 2,500 no 4 4 7 8% $0 $ 7,000 3 $ 4,500 yesarrow_forwardEach of the four independent situations below describes a finance lease in which annual lease payments are pay- able at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. Situation Lease term (years) Lessor's rate of return Fair value of lease asset Lessor's cost of lease asset Residual value: Estimated fair value Guaranteed fair value 1 4 10% $50,000 $50,000 0 2 7 11% $350,000 $350,000 $ 50,000 0 3 5 9% $75,000 $45,000 $7,000 $7,000 Required: For each situation, determine: a. The amount of the annual lease payments as calculated by the lessor. b. The amount the lessee would record as a right-of-use asset and a lease liability. 4 8 12% $465,000 $465,000 10 $ 45,000 $ 50,000arrow_forwardThe following facts pertain to a non-cancelable lease agreement between Wildhorse Leasing Company and Windsor Company, a lessee. Commencement date June 1, 2025 Annual lease payment beginning with June 1, 2025 $19,998.50 Bargain purchase option price at end of lease term $7,000.00 Lease term Economic life of leased equipment (no salvage value) Lessor's cost Fair value of asset at June 1, 2025 4 years 12 years $56,000 $78,999 Lessor's implicit rate (known to lessee) 6% Lessee's incremental borrowing rate 69 The collectibility of the lease payments by Wildhorse is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) (b) (c) Your answer is partially correct. Prepare a lease amortization schedule for Windsor for the 4-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) WINDSOR COMPANY (Lessee) Date 6/1/25 $ 6/1/25 6/1/26 6/1/27 6/1/28 5/31/29 Annual Lease Payment Plus BPO $ Lease…arrow_forward
- Each of the four independent situations below describes a sales-type lease in which annual lease payments a at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, $1) (Use appropriate factor(s) from the tables provided.) Situation 1 2 3 Lease term (years) 7 7 8 Lessor's and lessee's interest rate Residual value: 8 128 98 11% 10% Estimated fair value 0 $50,000 $8,000 $50,000 Guaranteed by lessee 0 0 $8,000 $60,000 Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers dollar amount.) Situation 2 A The lessor's: 1. Lease payments 2. Gross investment in the lease 3. Net investment in the lease The lessee's: 4. Lease payments 5. Right-of-use asset 6. Lease payable Barrow_forwardNonearrow_forwardOn January 1, 2021, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing's lease amortization schedule appear below: (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.) Jan. 1 2021 2021 2022 2023 2024 2025 2026 1. 2. WN 3. 4. 2038 2039 2040 2041 7 Payments 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 14,500 38,449 5. 6. Net investment Effective Decrease in Interest Balance 11,800 11,584 11,351 11,099 10,827 5,250 4,510 3,711 2,848 Lease term Asset's residual value Effective annual interest rate Lease payments for United Lease payments for NIC 7. 8. Right-of-use asset Required: 1. What is the lease term In years? 2. What is the asset's residual value expected at the end of the lease term?…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education