Homework Answers
Lessor Should classify the lease as finance lease (capital lease ) because the sum of the PV of lease payments amounts to substantially of the fair value of the underlying assets
Below is journal entries for 2019
| No. | Date | Account Titles and Explanation | Debit | Credit |
| 1 | 1st Jan | Net investment in the lease | 28,73,107 | |
| Cost of goods sold | 15,00,000 | |||
| To Revenue | 28,73,107 | |||
| To Property held for lease | 15,00,000 | |||
| (Lease commencement entry posted) | ||||
| 2 | 1st Jan | Cash/Bank | 2,00,000 | |
| To Net investment in the lease | 2,00,000 | |||
| (1st Rent recevied ) | ||||
| 3 | 1st Jul | Cash/Bank | 2,00,000 | |
| To Net investment in the lease | 1,06,924 | |||
| To Interest Income | 93,076 |
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LESSOR ACCOUNTING - PROBLEM 2 Using the same data of the previous exercise and assuming the...
LESSOR ACCOUNTING - PROBLEM 2 Using the same data of the previous exercise and assuming the following information, you will answer this exercise from the point of view of the lessor: Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by XYZ. Additional information: 1. Asset's cost $1,500,000. 2. Asset's FMV - $2,800,000 Required: a. Prepare journal entries for the year 2019. LESSEE ACCOUNTING - PROBLEM 1 ABC Company...
LESSOR ACCOUNTING – PROBLEM 2 Using the same data of the previous exercise and assuming the...
LESSOR ACCOUNTING – PROBLEM 2
Using the same data of the previous exercise and assuming the
following information, you will
answer this exercise from the point of view of the lessor:
Collectibility of the payments is
reasonably predictable, and there are no important
uncertainties surrounding the costs
yet to be incurred by XYZ.
Additional information:
1. Asset’s cost $1,500,000.
2. Asset’s FMV - $2,800,000
Required:
Prepare journal entries for the year 2019.
LESSEE ACCOUNTING - PROBLEM 1 ABC Company (ABC),...
LESSEE ACCOUNTING - PROBLEM 1 ABC Company (ABC), on January 1, 2019, enters into a 10-year...
LESSEE ACCOUNTING - PROBLEM 1 ABC Company (ABC), on January 1, 2019, enters into a 10-year noncancelable lease for equipment having an estimated useful life of 10 years. XYZ Corp.'s implicit interest rate is 8%. ABC uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of $200,000 at the beginning of each six-month period (SEMIANNUAL PAYMENTS). 2. A guarantee by ABC that XYZ Corp. (XYZ) will realize $100,000 from selling the asset...
LESSEE ACCOUNTING – PROBLEM 1 ABC Company (ABC), on January 1, 2019, enters into a 10-year...
LESSEE ACCOUNTING – PROBLEM 1 ABC Company (ABC), on January 1, 2019, enters into a 10-year noncancelable lease for equipment having an estimated useful life of 10 years. XYZ Corp.’s implicit interest rate is 8%. ABC uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of $200,000 at the beginning of each six-month period (SEMIANNUAL PAYMENTS). 2. A guarantee by ABC that XYZ Corp. (XYZ) will realize $100,000 from selling the asset...
Problem Set 3 (Total 40 pts) Daly Leasing Company (lessor) signs an agreement on January 1, 2017. to lease equipme...
Problem Set 3 (Total 40 pts) Daly Leasing Company (lessor) signs an agreement on January 1, 2017. to lease equipment to XYZ Company (lessee). The following information relates to this greement 1. The term of the non-cancelable lense is 3 years with to renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $80.000. Further, as the underlying asset (the equipment) has a $50.000 cost to...
Pharoah Leasing Company agrees to lease equipment to Novak Corporation on January 1, 2020. The following...
Pharoah Leasing Company agrees to lease equipment to Novak
Corporation on January 1, 2020. The following information relates
to the lease agreement.
1.
The term of the lease is 7 years with no renewal option, and
the machinery has an estimated economic life of 9 years.
2.
The cost of the machinery is $525,000, and the fair value of
the asset on January 1, 2020, is $713,000.
3.
At the end of the lease term, the asset reverts to the...
This is all that's provided by the question. Please help. Sandhill Incorporated leases a piece of...
This is all that's provided by the question. Please help.
Sandhill Incorporated leases a piece of machinery to Indigo Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $16,673 to be made at the beginning of each year. 2. The machinery' has a fair value of $87,056, a book value of $64,960, and an economic life of 10 years. At the end of the lease term, both...
Sheridan Incorporated leases a piece of machinery to Concord Company on January 1, 2020, under the...
Sheridan Incorporated leases a piece of machinery to Concord Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $10.535 to be made at the beginning of each year. 2. The machinery' has a fair value of $56,388, a book value of $42,080, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of...
Please explain how this answer is achieved. However, please explain using a scientific calculator only. -...
Please explain how this answer is achieved. However,
please explain using a scientific calculator only. - no
appendix tables or excel can be used.
11.31 (a) fair value + nil initial direct costs = PV minimum lease payments + any unguaranteed residual Initial payment on 1 July 2019 payment $50 000 PV of remaining lease rental $50 000 paid at the beginning of each 128 855 year (meaning that the final payment is in three years and not four years...
Your answer is partially correct. Try again. Laura Leasing Company signs an agreement on January 1,...
Your answer is partially correct. Try again. Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Swifty Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2017, is $69,000. The asset will revert to the lessor at the...
LESSOR ACCOUNTING - PROBLEM 2 Using the same data of the previous exercise and assuming the following information, you will answer this exercise from the point of view of the lessor: Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by XYZ. Additional information: 1. Asset's cost $1,500,000. 2. Asset's FMV - $2,800,000 Required: a. Prepare journal entries for the year 2019. LESSEE ACCOUNTING - PROBLEM 1 ABC Company...
LESSOR ACCOUNTING – PROBLEM 2
Using the same data of the previous exercise and assuming the
following information, you will
answer this exercise from the point of view of the lessor:
Collectibility of the payments is
reasonably predictable, and there are no important
uncertainties surrounding the costs
yet to be incurred by XYZ.
Additional information:
1. Asset’s cost $1,500,000.
2. Asset’s FMV - $2,800,000
Required:
Prepare journal entries for the year 2019.
LESSEE ACCOUNTING - PROBLEM 1 ABC Company (ABC),...
LESSEE ACCOUNTING - PROBLEM 1 ABC Company (ABC), on January 1, 2019, enters into a 10-year noncancelable lease for equipment having an estimated useful life of 10 years. XYZ Corp.'s implicit interest rate is 8%. ABC uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of $200,000 at the beginning of each six-month period (SEMIANNUAL PAYMENTS). 2. A guarantee by ABC that XYZ Corp. (XYZ) will realize $100,000 from selling the asset...
Problem Set 3 (Total 40 pts) Daly Leasing Company (lessor) signs an agreement on January 1, 2017. to lease equipment to XYZ Company (lessee). The following information relates to this greement 1. The term of the non-cancelable lense is 3 years with to renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2017, is $80.000. Further, as the underlying asset (the equipment) has a $50.000 cost to...
Pharoah Leasing Company agrees to lease equipment to Novak
Corporation on January 1, 2020. The following information relates
to the lease agreement.
1.
The term of the lease is 7 years with no renewal option, and
the machinery has an estimated economic life of 9 years.
2.
The cost of the machinery is $525,000, and the fair value of
the asset on January 1, 2020, is $713,000.
3.
At the end of the lease term, the asset reverts to the...
This is all that's provided by the question. Please help.
Sandhill Incorporated leases a piece of machinery to Indigo Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $16,673 to be made at the beginning of each year. 2. The machinery' has a fair value of $87,056, a book value of $64,960, and an economic life of 10 years. At the end of the lease term, both...
Sheridan Incorporated leases a piece of machinery to Concord Company on January 1, 2020, under the following terms. 1. The lease is to be for 4 years with rental payments of $10.535 to be made at the beginning of each year. 2. The machinery' has a fair value of $56,388, a book value of $42,080, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of...
Please explain how this answer is achieved. However,
please explain using a scientific calculator only. - no
appendix tables or excel can be used.
11.31 (a) fair value + nil initial direct costs = PV minimum lease payments + any unguaranteed residual Initial payment on 1 July 2019 payment $50 000 PV of remaining lease rental $50 000 paid at the beginning of each 128 855 year (meaning that the final payment is in three years and not four years...
Your answer is partially correct. Try again. Laura Leasing Company signs an agreement on January 1, 2017, to lease equipment to Swifty Company. The following information relates to this agreement. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2017, is $69,000. The asset will revert to the lessor at the...
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