Question

1. On January 1, 2021, Sans Serif Publishers leased printing equipment from First Lease Corp. First Lease Corp purchased the
0 0
Add a comment Improve this question Transcribed image text
Answer #1

A lease will be classified as a Financing lease if it meets one or more of the following criteria.

  • The lease transfers ownership of the leased property to the lessee by the lessor at the end of the lease term.
  • The lease contains a bargain purchase option
  • The lease term is for a period which contains at least 75% of the Assets asset's economic life.
  • The present value of the lease Rentals exceed 90% of the fair market value of the leased Asset.

We apply these test to classify the lease whether it is operatin or financing….

  1. It is not mentioned that property will transfer or not the asset at the end of lease period.
  2. There is no obligation to purchase the asset at the end of lease period.
  3. Assets economic life 8 year (6+2) which is 6/8*100= 75%
  4. Present value of lease rentals 90000+90000* PVAF(10%,5yr)

= 90000+90000*3.791

= 90000+341171

=431171

Which is (431171/479079)100 = 89.9999% almost 90%

Conclusion the above lease is a financing lease because it qualifies two condition of given condition.

Add a comment
Know the answer?
Add Answer to:
1. On January 1, 2021, Sans Serif Publishers leased printing equipment from First Lease Corp. First...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • On January 1, 2021, Company A leased equipment from Company B. The lease agreement specifies seven...

    On January 1, 2021, Company A leased equipment from Company B. The lease agreement specifies seven annual payments of $50,000 beginning January 1, 2021, the beginning of the lease, and at each December 31, thereafter. At the end of the seven-year lease term the equipment will be returned to the lessor and is expected to have a residual value of $24,000. The estimated useful life of the equipment is eight years. The interest rate in these financing arrangements is 10%....

  • 22 On January 1, 2021, Company A leased equipment from Company B. The lease agreement specifies...

    22 On January 1, 2021, Company A leased equipment from Company B. The lease agreement specifies ten annual payments of $20,000 beginning January 1, 2021, the beginning of the lease, and at each December 31, thereafter. At the end of the ten- year lease term the equipment will be returned to the lessor and is expected to have a residual value of $12,000. The estimated useful life of the equipment is twelve years. The interest rate in these financing arrangements...

  • An explanation and calculations would be appreciated. On January 1, 2021, QuickStream Communications leased telephone equipment...

    An explanation and calculations would be appreciated. On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $1,749,508. The lease agreement specifies six annual payments of $390,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase...

  • On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease...

    On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 11% rate of return for providing long-term financing. The lease agreement specified the following: Ten annual payments of $64,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $392,223. The lease qualifies...

  • On January 1, 2021, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed...

    On January 1, 2021, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified: (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.) Ten annual payments of $56,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. The...

  • On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease...

    On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 10% rate of return for providing long-term financing. The lease agreement specified the following: Ten annual payments of $66,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $412,300. The lease qualifies...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    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 $27,000 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 $198,000 (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...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    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 $20,000 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 $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...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    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 $22,000 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 $189,000 (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...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    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 $20,000 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 $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...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT