FINANCIAL+MANAG.ACCT.
9th Edition
ISBN: 9781260728774
Author: Wild
Publisher: RENT MCG
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Chapter 10, Problem 21E
To determine
Concept Introduction:
Classification of leases: A Lease can be classified as an operating lease or finance lease. A lease is classified as a capital lease when there is a transfer of ownership of the asset or a lease period more than or equal to 75 percent of the economic life of the asset or the present value of lease payment exceeds 90 percent of the fair value of the asset if any of the given conditions are not met lease is characterized as an operating lease.
Whether the given lease transactions are classified as operating leases or finance leases.
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Students have asked these similar questions
The Harris Company is the lessee on a four-year lease with the following payments at the end of each year:
Year 1:
$
11,500
Year 2:
$
16,500
Year 3:
$
21,500
Year 4:
$
26,500
An appropriate discount rate is 7 percentage, yielding a present value of $62,927.a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset?
a-2. If the lease is an operating lease, what will be the initial value of the lease liability?
a-3. If the lease is an operating lease, what will be the lease expense shown on the income statement at the end of year 1?
a-4. If the lease is an operating lease, what will be the interest expense shown on the income statement at the end of year 1? (Leave no cells blank – be certain to enter “0” wherever required.)
indicate whether the company has entered into a finance lease oran operating lease. The lessor retains title to the asset, and the lease term is 3 years on an asset that has a 10-year useful life.
Lessee enters into a three year lease of equipment and agrees to make the following annual payments at the end of
each year 10,000 in year one, 12,000 in year two and 14,000 in year three. Discount rate is approx. 4, 235% and right of
use asset is depreciated on a straight line basis over the lease term. What is the value of the lease liability at the end of
years 2 & 3?
Chapter 10 Solutions
FINANCIAL+MANAG.ACCT.
Ch. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QS
Ch. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Prob. 19QSCh. 10 - Prob. 20QSCh. 10 - Prob. 21QSCh. 10 - Prob. 22QSCh. 10 - Prob. 23QSCh. 10 - Prob. 24QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Prob. 22ECh. 10 - Prob. 23ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 7PSACh. 10 - Prob. 8PSACh. 10 - Prob. 9PSACh. 10 - Prob. 10PSACh. 10 - Prob. 11PSACh. 10 - Prob. 12PSACh. 10 - Prob. 13PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 7PSBCh. 10 - Prob. 8PSBCh. 10 - Prob. 9PSBCh. 10 - Prob. 10PSBCh. 10 - Problem 10-10BB Effective Interest: Amortization...Ch. 10 - Prob. 12PSBCh. 10 - Prob. 13PSBCh. 10 - Prob. 10SPCh. 10 - Prob. 1.1AACh. 10 - Prob. 1.2AACh. 10 - Prob. 1.3AACh. 10 - Prob. 2.1AACh. 10 - Prob. 2.2AACh. 10 - Prob. 2.3AACh. 10 - Prob. 3.1AACh. 10 - Prob. 3.2AACh. 10 - Prob. 3.3AACh. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is the issue price of a $2,000 bond sold at...Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTN
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- Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?arrow_forwardA lease agreement that qualifies as a finance lease calls for annual lease payments of $10,000 over a five-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 4%. The lessor's fiscal year is the calendar year. The lessor manufactured this asset at a cost of $30,000. Required: a. Determine the price at which the lessor is "selling" the asset (present value of the lease payments). b. Create a partial amortization table through the second payment on January 1, Year 2. c. What would be the increase in earnings that the lessor 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) Complete this question by entering your answers in the tabs below. Required A Required B Determine the price at which the lessor is "selling" the asset (present value of the…arrow_forwardindicate whether the company has entered into a finance lease oran operating lease. The title is transferred to the lessee. The lessee can purchase the asset for $1 at the end of the lease, and the lease term is five years. The leased asset has an expected useful life of six years.arrow_forward
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