Minnetonka Company leases an asset. Information regarding the lease: Fair value of the asset: $400,000. Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. Annual lease payments are $60,000 Implicit interest rate: 11%. Minnetonka can purchase the asset at the end of the lease period for $50,000. A. Operating B. Finance C. Short Term D. Long Term

Minnetonka Company leases an asset. Information regarding the lease: Fair value of the asset: $400,000. Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. Annual lease payments are $60,000 Implicit interest rate: 11%. Minnetonka can purchase the asset at the end of the lease period for $50,000. A. Operating B. Finance C. Short Term D. Long Term

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

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
company leases the following asset:• Fair value of $200,000.• Useful life of 5 years with no salvage value.• Lease term is 4 years.• Annual lease payment is $30,000 and the lease rate is 11%.• The company’s overall borrowing rate is 9.5%.• The firm can purchase the equipment at the end of the lease period for $45,000.What type of lease is this?a. Operating.b. Capital.c. Financing.d. Long term.
Minnetonka Company leases an asset. Information regarding the lease (Minnetonka is the lessee): • Fair value of the asset: $400,000. • Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. • Annual lease payments are $60,000 Implicit interest rate: 11%. • Minnetonka can purchase the asset at the end of the lease period for $50,000. How should the lessee classify this lease? A) Operating. B) Finance. C) Short term. D) Long term. O B O O OO
Case 1: ABC leases an asset from XYZ, a lease financier, with the following terms: Lease term - 5 years Annual rental - 200,000 Residual Value - 30,000 Initial direct cost - 50,000 Executory cost - 2,000 The asset leased by ABC is economically useful for 8 years, however, the ownership will transfer to the lessee by the end of the lease term. The residual value was guaranteed by a party related to ABC. The initial direct cost was shouldered by ABC to secure the contract of lease as well as the executory cost which will be settled every end of each year. The first rental payment will be made at the end of the year the lease commenced (January 1, 2021). During that year the interest rate implicit to the lease is 10%. ABC has made an outright payment of P40,000 to XYZ for closing the lease contract with the company. Additionally, an improvement is built into the leased property which amounted to P100,000. It is estimated to be useful for 4 years. At XYZ’s perspective, the total amount of…
Fitbit Ltd has leased a machine on the following terms: Date of entering lease 1 July 2019 Duration of lease 5 years Life of asset 6 years Unguaranteed residual value $40,000 Lease payments inception (at the start) $60,000 Annual payments (5) $65,000 Implied rate 11.0 %. Please assist to determine the Fair Value (rounded off) of the leased asset. Thanks
JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd $16m and has an expected useful life of 12 years. Its selling price is $22.4m. The present value of the lease payments is $20.4m. The first payment was made at the commencement of the lease. Required: How should JK Ltd classify this list and why?
BNM Itd. Acquired on asset of Rs. 440,000 through a finance lease agreement on 1-1-2018 with no residual value. The lease term is five years with annual lease rentals of Rs .100,000 payable at the start of each year. The implicit rate of interest is 10% . Calculate: a. Gross investment in lease b. Net investment in lease c. Unearned finance income d: Lease amortization schedule
Novak Limited has entered into an agreement to lease manufacturing equipment. The following terms are included in the lease: Lease terms 5 years Payments required monthly on the last day of the month Leasing interest rate Estimated useful life of equipment PV of lease payments $3,114 8%/annum 5 years $153,600 The lease is entered into on January 1, 2024. The equipment can be purchased for $160,000. The company uses straight-line depreciation. (a) Prepare the journal entry for 2024 to recognize the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entry before credit entry.) Date January 1, 2024 Account Titles Debit Credit
Calculate minimum lease payments for A Ltd. who took an asset on a 5 years lease from B Ltd. using the following information: Payments over the lease term Contingent rent Cost for services given by B Ltd. Taxes to be reimbursed to B Ltd. Residual value guaranteed by A Ltd. Fair value of asset after 5 years 1,000 per month *20,000 40,000 15,000 5,000 6,000 Also, A Ltd. has an option to purchase the asset after a period of 5 years at 2,000. It is reasonably certain that A Ltd. will exercise the option. Required Calculation Minimum Lease Payments.
TB MC Qu. 15-72 (Static) XYZ Company leased equipment... XYZ Company leased equipment to West Corporation under a lease agreement that qualifies as a finance lease to West, but not as a result of a bargain purchase option or a title transfer. The present value of the lease payments is $600,000. The expected economic life of the asset is seven years. The lease term is five years. Using the straight-line method, what would West record as annual amortization? Multiple Choice О $120,000 О $85,714 $60,000 $0
5. ABC leases an asset from XYZ, a lease financier, with the following terms: Lease Commencement – January 1, 2021 Lease term - 5 Annual rental for the first 3 years - P250,000 and 300,000 for the remaining 2 years Discount rate is 10% Initial direct cost – 130,500 The initial direct cost is shouldered by ABC fully. The useful life of the leased property is 6 years. The asset will revert to the lessor at the end of the lease term. However, at the end of year 4, ABC actually purchased from XYZ at P300,000. QUESTION: How much should ABC record the asset as a result of the actual purchase of the lease asset?
After the fourth year, the residual value was estimated at The lease provided for a transfer of title to the lessee at the and four year-end rental payments. The lease qualified as a Module4_Lease.pdf x of the asset was P7,994,000. Terms of the lease specify four-year life for the lease, an annual interest rate of 15% Ericson Company leased an asset to another entity. The coet 12 / 19 100% Problem 13-13 (IAA) direct financing lease.. The lease provided for a transfer of title to the lessee After the fourth year, the residual value was estimated P1,000,000. The PV of 1 at 15% for 4 periods is .572, and the PV of a ordinary annuity of 1 at 15% for 4 periods is 2.855. What is the annual rental payment? a. 2,000,000 b. 3,000,350 c. 2,800,000 d. 2,599,650