Use the table to answer the questions below:
On December 31, 2018, Yard Art Landscaping leased a delivery
truck from Branch Motors. Branch paid $36,000 for the truck. Its
retail value is $70,297.
The lease agreement specified annual payments of $21,500 beginning
December 31, 2018, the beginning of the lease, and at each December
31 through 2021. Branch Motors’ interest rate for determining
payments was 11%. At the end of the four-year lease term (December
31, 2022) the truck was expected to be worth $10,000. The estimated
useful life of the truck is five years with no salvage value. Both
companies use straight-line amortization or depreciation.
Yard Art guaranteed a residual value of $6,000. Yard Art’s
incremental borrowing rate is 9% and is unaware of Branch’s
implicit rate.
A $3,000 per year maintenance agreement was arranged for the truck
with an outside service firm. As an expedient, Branch Motors agreed
to pay this fee. It is, however, reflected in the $21,500 lease
payments.
Homework Answers
Part 2
|
The amount that Yard Art would record as a right-of-use asset and a lease liability would be |
$69580 |
|
Lessee’s calculation of the present value of minimum lease payments |
|
|
Present value of periodic lease
payments |
65329 |
|
Plus: Present value of the lessee-guaranteed |
4251 |
|
Present value of lessee’s minimum lease payments |
$69580 |
|
present value of $1: n=4, i=9% is 0.70843 |
|
|
present value of an annuity due of $1: n=4, i=9% is 3.53129 |
Part 4
|
Amount to be recovered (fair value) |
70297 |
|
Less: Present value of the residual value (10000*0.65873) |
(6587) |
|
Amount to be recovered through periodic lease payments |
63710 |
|
Lease payments at the beginning of each of the next four years (63710/3.44371) |
18500 |
|
Plus: Executory costs |
3000 |
|
Lease payments including executory costs |
$21500 |
|
present value of $1: n=4, i=11% is 0.65873 |
|
|
present value of an annuity due of $1: n=4, i=11% is 3.44371 |
Part 5
|
The amount that Branch Motors would record as a sales-revenue would be |
$77872 |
|
Lessor’s calculation of the present value of minimum lease payments |
|
|
Present value of periodic lease
payments |
63709 |
|
Plus: Present value of the lessee-guaranteed |
14163 |
|
Present value of lessee’s minimum lease payments |
$77872 |
|
present value of $1: n=4, i=11% is 0.65873 |
|
|
present value of an annuity due of $1: n=4, i=11% is 3.44371 |
Add Answer to:
Use the table to answer the questions below:
On December 31, 2018, Yard Art Landscaping leased...
Check 4. On December 31, 2021, Yard Art Landscaping leased a delivery truck from Branch Motors....
Check 4. On December 31, 2021, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45.114. 2 points The lease agreement specified annual payments of $11,000 beginning December 31, 2021, the beginning of the lease, and at each December 31 through 2024. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2025) the truck was expected to be worth...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truc...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid...
On December 31, 2018, Yard Art Landscaping leased a delivery
truck from Branch Motors. Branch paid $39,000 for the truck. Its
retail value is $42,382.
The lease agreement specified annual payments of $13,000 beginning
December 31, 2018, the beginning of the lease, and at each December
31 through 2021. Branch Motors’ interest rate for determining
payments was 10%. At the end of the four-year lease term (December
31, 2022) the truck was expected to be worth $11,000. The estimated
useful...
The answer is not 39563 or 39564 On December 31, 2018, Yard Art Landscaping leased a...
The answer is not 39563 or 39564
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected...
On December 31, 2018, Carla Vista Corporation leased a ship from Fort Company for an 8-year...
On December 31, 2018, Carla Vista Corporation leased a ship from Fort Company for an 8-year period expiring December 30, 2026. Equal annual payments of $570000 are due on December 31 of each year, beginning with December 31, 2018. The lease is properly classified as a finance lease on Carla Vista‘s books. The present value at December 31, 2018 of the eight lease payments over the lease term discounted at 11% is $2933290. Assuming all payments are made on time,...
5. Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2018, Rhone-Me...
5.
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2018, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2022, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $820,000 to manufacture and has an expected useful life of six years. Its normal sales price is $875,879. The expected residual value of $40,000 at December 31, 2022, is not guaranteed. Equal payments under the...
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone-Metro leased equipment...
Rhone-Metro Industries manufactures equipment that is sold or
leased. On December 31, 2021, Rhone-Metro leased equipment to
Western Soya Co. for a four-year period ending December 31, 2025,
at which time possession of the leased asset will revert back to
Rhone-Metro. The equipment cost $250,000 to manufacture and has an
expected useful life of six years. Its normal sales price is
$294,546. The expected residual value of $17,000 at December 31,
2025, is not guaranteed. Equal payments under the lease...
On December 31, 2021, Lang Corporation leased a ship from Fort Company for an eight-year period...
On December 31, 2021, Lang Corporation leased a ship from Fort Company for an eight-year period expiring December 30, 2029. Equal annual payments of $500,000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Lang ‘s books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 10% is $2,934,213. Assuming all payments are made on time, the...
Check 4. On December 31, 2021, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45.114. 2 points The lease agreement specified annual payments of $11,000 beginning December 31, 2021, the beginning of the lease, and at each December 31 through 2024. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2025) the truck was expected to be worth...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $15,000. The estimated useful...
On December 31, 2018, Yard Art Landscaping leased a delivery
truck from Branch Motors. Branch paid $39,000 for the truck. Its
retail value is $42,382.
The lease agreement specified annual payments of $13,000 beginning
December 31, 2018, the beginning of the lease, and at each December
31 through 2021. Branch Motors’ interest rate for determining
payments was 10%. At the end of the four-year lease term (December
31, 2022) the truck was expected to be worth $11,000. The estimated
useful...
The answer is not 39563 or 39564
On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $45,114. The lease agreement specified annual payments of $11,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected...
5.
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2018, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2022, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $820,000 to manufacture and has an expected useful life of six years. Its normal sales price is $875,879. The expected residual value of $40,000 at December 31, 2022, is not guaranteed. Equal payments under the...
Rhone-Metro Industries manufactures equipment that is sold or
leased. On December 31, 2021, Rhone-Metro leased equipment to
Western Soya Co. for a four-year period ending December 31, 2025,
at which time possession of the leased asset will revert back to
Rhone-Metro. The equipment cost $250,000 to manufacture and has an
expected useful life of six years. Its normal sales price is
$294,546. The expected residual value of $17,000 at December 31,
2025, is not guaranteed. Equal payments under the lease...
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