Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 18, Problem 18.3BE
Classification as Finance or Operating Lease, Lessee. Dial Digital Solutions signed a 3-year lease at the beginning of the current year. The leased equipment has an economic life of 5 years and a fair value of $1.450. Under the terms of the lease, Dial is required to pay $500 on January 1 of each year. There is no purchase option, and Dial must return the equipment at the end of the lease term. Dial does not know the lessor’s implicit rate but recently borrowed at 5% under a 3-year loan agreement. Should Dial account for this lease as an operating or a finance lease?
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Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
there are 6 entries
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
X
Chart of Accounts
CHART OF ACCOUNTS
Keller Corporation
General Ledger
ASSETS
111…
Keller Corporation (the lessee) entered into a general equipment lease with Dallo Company (the lessor) on January 1 of Year 1. The following information pertains to this lease agreement:
1.
The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.
2.
The lease term is 8 years and requires annual payments of $10,000 at the beginning of each year.
3.
The fair value of the equipment at lease inception is $100,000. Assume that the present value of lease payments discounted at a 10% interest rate is $58,684.19.
4.
The equipment has an estimated economic life of 20 years and has zero residual value at the end of this time.
Required:
Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
CHART OF ACCOUNTS
Keller Corporation
General Ledger
ASSETS
111
Cash
121
Accounts Receivable
141…
Chapter 18 Solutions
Intermediate Accounting
Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2QCh. 18 - Prob. 18.3QCh. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6QCh. 18 - How is the right-of-use asset measured?Ch. 18 - What components are included in a lease contract?Ch. 18 - How does a lessee separate lease and nonlease...Ch. 18 - How does a lessor separate lease and nonlease...
Ch. 18 - Does a lessee have an option not to separate lease...Ch. 18 - What are the criteria for a lessee to report a...Ch. 18 - Prob. 18.13QCh. 18 - Can the lessor account for a lease either as an...Ch. 18 - What is the difference in the lessees lease...Ch. 18 - How does a guaranteed residual value affect the...Ch. 18 - Prob. 18.17QCh. 18 - What discount rate does the lessee use to...Ch. 18 - Does the choice of discount rate (i.e., the lessee...Ch. 18 - Prob. 18.20QCh. 18 - Prob. 18.21QCh. 18 - Prob. 18.22QCh. 18 - How does a lessee measure the lease liability?Ch. 18 - What is the lessees short-term lease policy...Ch. 18 - Prob. 18.25QCh. 18 - What are the lessee s accounting and reporting...Ch. 18 - Prob. 18.27QCh. 18 - Prob. 18.28QCh. 18 - Prob. 18.29QCh. 18 - How does the lessor measure the net investment in...Ch. 18 - Prob. 18.31QCh. 18 - Prob. 18.32QCh. 18 - Prob. 18.33QCh. 18 - Baxter Brothers, Inc. enters into a four-year...Ch. 18 - Zhou Systems signed a 5-year lease at the...Ch. 18 - Insight Corporation leases equipment for 5 years...Ch. 18 - Lowe Leasing Company recently leased machinery to...Ch. 18 - Prob. 18.5MCCh. 18 - Prob. 18.6MCCh. 18 - Prob. 18.7MCCh. 18 - Bischoff Enterprises leases office space from...Ch. 18 - Identifying Lease and Nonlease Components. Deane...Ch. 18 - Prob. 18.2BECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as a Finance or Operating Lease,...Ch. 18 - Prob. 18.7BECh. 18 - Prob. 18.8BECh. 18 - Prob. 18.9BECh. 18 - Classification of Lease, Lessor, IFRS. Repeat the...Ch. 18 - Prob. 18.11BECh. 18 - Finance Lease, Lessee, Lessor, Guaranteed Residual...Ch. 18 - Finance Lease, Lessee, Lessor, Unguaranteed...Ch. 18 - Composition of Lease Payments, Variable Payments....Ch. 18 - Composition of Lease Payments. Variable Payments....Ch. 18 - Determining the Implicit Rate In the Lease. Assume...Ch. 18 - Prob. 18.17BECh. 18 - Prob. 18.18BECh. 18 - Prob. 18.1ECh. 18 - Allocation of Total Payments to Lease and Nonlease...Ch. 18 - Operating Lease, Nonlease Components, Lessee....Ch. 18 - Operating Lease, Rate or Index, Effect of Variable...Ch. 18 - Prob. 18.5ECh. 18 - Prob. 18.6ECh. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.9ECh. 18 - Prob. 18.10ECh. 18 - Prob. 18.11ECh. 18 - Prob. 18.12ECh. 18 - Prob. 18.13ECh. 18 - Finance Lease, Purchase Option, Lessee,...Ch. 18 - Prob. 18.15ECh. 18 - Prob. 18.16ECh. 18 - Prob. 18.17ECh. 18 - Operating Lease, Lessor. True Image Copier Company...Ch. 18 - Operating Lease, Lessee, Amortization Schedules,...Ch. 18 - Prob. 18.20ECh. 18 - Prob. 18.21ECh. 18 - Classification as Finance or Operating Lease....Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance, Sales-Type, or...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Classification as Finance or Operating Lease,...Ch. 18 - Prob. 18.8PCh. 18 - Prob. 18.9PCh. 18 - Prob. 18.10PCh. 18 - Prob. 18.11PCh. 18 - Direct Financing Lease, Deferred Selling Profit,...Ch. 18 - Cases Judgment Cases Judgment Case 1: Comparison...Ch. 18 - Judgment Case 2: Lease Classification On January...Ch. 18 - Prob. 1FSCCh. 18 - Prob. 2FSCCh. 18 - Surfing the Standards Case 1: Lease Contracts...Ch. 18 - Prob. 2SSCCh. 18 - Prob. 3SSCCh. 18 - Basis for Conclusions Case 1: Operating Lease...Ch. 18 - Prob. 2BCCCh. 18 - Basis for Conclusions Case 3: Lease Classification...
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