Carweezy Autoparts leased an industrial press from Snap-On Tools on January 1, 2021. The lease is for a 3-year period ending December 31, 2023. Annual payments are $42,000 beginning with the first payment on January 1, 2021, and each December 31 through 2022. NAPA has the option to purchase the industrial press on December 30, 2023 for $51,000, and exercise of the option seems reasonably certain. The machine's estimated useful life is 6 years with no salvage value. The implicit rate of return in the lease is 12%. Snap-On initially records the lease receivable at $149,283. The entry on December 31, 2021 for Snap-On Tools will include which of the following? A. Credit to interest revenue for $12,874 B. Debit to lease receivable for $29,126 C. Credit to cash for $42,000 D. Debit to lease payable for $29,126

Carweezy Autoparts leased an industrial press from Snap-On Tools on January 1, 2021. The lease is for a 3-year period ending December 31, 2023. Annual payments are $42,000 beginning with the first payment on January 1, 2021, and each December 31 through 2022. NAPA has the option to purchase the industrial press on December 30, 2023 for $51,000, and exercise of the option seems reasonably certain. The machine's estimated useful life is 6 years with no salvage value. The implicit rate of return in the lease is 12%. Snap-On initially records the lease receivable at $149,283. The entry on December 31, 2021 for Snap-On Tools will include which of the following? A. Credit to interest revenue for $12,874 B. Debit to lease receivable for $29,126 C. Credit to cash for $42,000 D. Debit to lease payable for $29,126

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....

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On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Careweezy Autoparts leased an industrial press from Snap-On Tools on January 1, 2021. The lease is for a 3-year period ending December 31, 2023. Annual payments are $42,000 beginning with the first payment on January 1, 2021, and each December 31 through 2022. NAPA has the option to purchase the industrial press on December 30, 2023 for $51,000, and exercise of the option seems reasonably certain. The machine's estimated useful life is 6 years with no salvage value. The implicit rate of return in the lease is 12%. Snap-On initially records the lease receivable at $149,283. What will the balance be in the right-of-use asset account for NAPA Autoparts on December 31, 2022? A. $99,521 B. $45,536 C. $78,157 D. $124,402
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Prepare the appropriate general journal entries for Federated from the beginning of the lease through the end of the lease term.
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term.
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $34,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $43,000 when its fair value was expected to be $58,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12%. (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.) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. The lease agreement specified annual payments of $38,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $47,000 when its fair value was expected to be $62,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor’s implicit rate of return was 20%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. Prepare the…
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. The lease agreement specified annual payments of $31,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $40,000 when its fair value was expected to be $55,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 11%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare the…
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. . The lease agreement specified annual payments of $34,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. . The company had the option to purchase the machine on December 30, 2026, for $43,000 when its fair value was expected to be $58,000, a sufficient difference that exercise seems reasonably certain. . The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12%. Note: Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease llability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Prepare…
Sheridan Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2020. Sheridan had purchased the machine during 2016 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Compute the amount of the lease receivable.
Federated Fabrications leased a tooling machine on January 1, 2024, for a three-year period ending December 31, 2026. The lease agreement specified annual payments of $34,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2025. The company had the option to purchase the machine on December 30, 2026, for $43,000 when its fair value was expected to be $58,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life was six years with no salvage value. Federated was aware that the lessor's implicit rate of return was 12 %. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Calculate the amount Federated should record as a right-of-use asset and lease liability for this finance lease. 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term. 3. Complete this…
Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,384 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine during 2019 for $130,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. (a.) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $ (b.) Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal…