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Whispering Industries and Metlock Inc. enter into an agreement that requires Metlock Inc. to build three die...
Problem 21-3 Cheyenne Industries and Ayayai Inc. enter into an agreement that requires Ayayai Inc. to build three diesel-electric engines to Cheyenne's specifications. Upon completion of the engines, Cheyenne has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $445,159 each January 1, starting January 1, 2017. Cheyenne's incremental borrowing rate is 10%. The...
Problem 21A-12b (Part Level Submission) Orole Industries and Waterway Inc. enter into an agreement that requires Waterway Inc. to build three diesel electric engines to Orioles specifications. Upon completion of the engines, Orole has agreed to lease them for a period of 10 years and to assume all costs and risk of ownership. The lease is non-cancelable, becomes effective on January 1, 2017, and requires annual rental payments of $373,637 each January 1, starting January 1, 2017 Orole's incremental borrowing...
Problem 21A-12 D-g (Part Level Submission) Splish Industries and Blossom Inc. enter into an agreement that requires Blossom Inc. to build three diesel-electric engines to Splish's specifications. Upon completion of the engines, Splish has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2017, and requires annual rental payments of $385,173 each January 1, starting January 1, 2017 Splish's incremental borrowing...
Problem 21-3 Indigo Industries and Sweet Inc. enter into an agreement that requires Sweet Inc. to build three diesel-electric engines to Indigo’s specifications. Upon completion of the engines, Indigo has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $403,580 each January 1, starting January 1, 2017. Indigo’s incremental borrowing rate is 9%. The...
On January 1, 2017, Whispering Co. leased a building to Metlock Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,320,000 and was purchased for cash on January 1, 2017 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $257,900 per year and are made at the end of the...
Whispering Corp. was a 30% owner of Metlock Company, holding 204,000 shares of Metlock’s common stock on December 31, 2019. The investment account had the following entries. Investment in Metlock 1/1/18 Cost $3,140,000 12/6/18 Dividend received $160,000 12/31/18 Share of income 390,000 12/5/19 Dividend received 250,000 12/31/19 Share of income 520,000 On January 2, 2020, Whispering sold 102,000 shares of Metlock for $3,360,000, thereby losing its significant influence. During the year 2020, Metlock experienced the following results of operations and...
Kingbird Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2017. Annual rental payments of $43,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Kingbird’s incremental borrowing rate is 9%. Kingbird is unaware of the rate being used by the lessor. At the end of the lease, Kingbird has the option to buy the...
Question 3 Whispering Winds, Inc., a private company that applies ASPE, incurred $14,400 in materials and $12,700 in direct labour costs between January and March 2017 to develop a new product. In May 2017, the criteria required to capitalize development costs were met. A further $49,400 was spent for materials, $16,200 for direct labour costs, $3,100 for borrowing costs, and $66,100 for directly related legal fees. Prepare the appropriate journal entries. (Credit account titles are automatically indented when the amount...
On January 1, 2017, Whispering Company contracts to lease equipment for 5 years, agreeing to make a payment of $879,904 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $4,000,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Whispering’s incremental borrowing rate is 6%, and the implicit rate in the lease is 5%, which is known by Whispering....
On January 1, 2017, Sage Company leased equipment to Pronghorn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor lease 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The fair value of the equipment on January 1, 2017, is $155,000, and its cost is $124,000. 4. The equipment has an economic life of...