On December 31, 2024, Blossom Company leased machinery from Wildhorse Corporation for an agreed-upon lease term of 3 years. Blossom agreed to make annual lease payments of $13,000, beginning on December 31, 2024. The expected residual value of the machinery at the end of the lease term is $7,000, though Blossom does not guarantee any residual value to Wildhorse. What amount will Blossom record as its lease liability on December 31, 2024, if its incremental borrowing rate is 8% and the implicit rate of the lease is unknown? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answe to O decimal places, eg. 5,275.) Click here to view factor tables. Lease liability $ 33502

On December 31, 2024, Blossom Company leased machinery from Wildhorse Corporation for an agreed-upon lease term of 3 years. Blossom agreed to make annual lease payments of $13,000, beginning on December 31, 2024. The expected residual value of the machinery at the end of the lease term is $7,000, though Blossom does not guarantee any residual value to Wildhorse. What amount will Blossom record as its lease liability on December 31, 2024, if its incremental borrowing rate is 8% and the implicit rate of the lease is unknown? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answe to O decimal places, eg. 5,275.) Click here to view factor tables. Lease liability $ 33502

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter11: Notes, Bonds, And Leases

Section: Chapter Questions

Problem 28E

See similar textbooks

Similar questions

Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
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?
Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? If the lease term is one year or longer, a liability must be recognized. If the lease term is less than one year, an asset must be recognized. The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.
Delray Leasing Company signs an agreement on January 1, 2025, to lease equipment to Sheridan Company. The following information relates to this agreement. Assume that the expected residual value at the end of the lease is $27,400, such that the payments are $22,227.36. 1. 2. 3. 4. 5. 6. The term of the non-cancelable lease is 4 years with no renewal option. The equipment has an estimated economic life of 6 years. The fair value of the asset at January 1, 2025, is $105,300. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $27,400, none of which is guaranteed. The agreement requires equal annual rental payments of $22,227.36 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 6%. The lessor's implicit rate is 5% and is unknown to the lessee. Sheridan uses the straight-line depreciation method for all equipment. Date Account Titles and Explanation (To record the lease) (To…
Wildhorse Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $199,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. ● The lease requires payments of $45,359 at the beginning of each year starting January 1, 2019. ● At the end of the lease term, the equipment is to be returned to the lessor. ● Lantus’ implied interest rate is 7%, while Wildhorse’s borrowing rate is 8%. Wildhorse uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE. (a)Determine the present value of the minimum lease payments Ans 199,000 B.) Prepare Wildhorse’s lease amortization schedule using the effective interest method. (Round answers to 0 decimal places, e.g. 5,275.) Date Payment Interest Principal Balance…
* Your answer is incorrect. Ivanhoe Corporation entered into an operating lease to lease equipment from Oriole, Inc. on January 1, 2025. The lease calls for annual lease payments of $9,000, beginning on December 31, for each of the 5 years of the lease. In addition, Oriole, Inc. will pay Ivanhoe Corporation $2,000 as a cash incentive for entering the lease by December 31. In relation to the lease agreement, Ivanhoe incurred the following costs. Commissions for selling agents Internal engineering costs Legal fees resulting from the execution of the lease $700 Value of the right-of-use asset $ 500 2,800 Ivanhoe's incremental borrowing rate is 6%. If the value of the lease liability is $40,186, what amount will Ivanhoe record as the value of the right-of-use asset on January 1, 2025, at commencement of the operating lease? 42,186
On December 31, 2024, Sunland Company leased machinery from Sheridan Corporation for an agreed-upon lease term of 3 years. Sunland agreed to make annual lease payments of $20,000, beginning on December 31, 2024. The expected residual value of the machinery at the end of the lease term is $10,000, though Sunland does not guarantee any residual value to Sheridan. What amount will Sunland record as its lease liability on December 31, 2024, if its incremental borrowing rate is 4% and the implicit rate of the lease is unknown? (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.) Click here to view factor tables. Lease liability $
20.... . . . Your answer is incorrect. On December 31, 2019, Sandhill Company leased machinery from Terminator Corporation for an agreed upon lease term of 3 years. Sandhill agreed to make annual lease payments of $15,000, beginning on December 31, 2019. The expected residual value of the machinery at the end of the lease term is $7,500, though Sandhill does not guarantee any residual value to Terminator.What amount will Sandhill record as its lease liability on December 31, 2019, if its incremental borrowing rate is 5% and the implicit rate of the lease is unknown? (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.)Click here to view factor tables. Lease liability $
Sarasota Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. The lease requires payments of $38,073 at the beginning of each year starting January 1, 2019. At the end of the lease term, the equipment is to be returned to the lessor. Lantus' implied interest rate is 6%, while Sarasota's borrowing rate is 7%. Sarasota uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assuming that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Show Transcribed Text Date Jan. 1, 2019 Dec. 31, 2019 Account Titles and Explanation Equipment Acquired for Lessee (To record purchase of equipment.) (To record…
[The following information applies to the questions displayed below.] High Time Tours leased rock-climbing equipment from Adventures Leasing on January 1, 2024. High Time has the option to renew the lease at the end of two years for an additional three years for $9,900 per quarter. Adventures purchased the equipment at a cost of $226,342. Note: Use Excel, or a financial calculator. Related Information: Lease tere Lease renewal option for an additional Quarterly lease payments Economic life of asset Interest rate charged by the lessor 2 years (8 quarterly periods) 3 years at $9,900 per quarter $ 16,000 at January 1, 2024, and at March 31, June 30, September 30, and December 31 thereafter. 5 years 8% Required: 1. Prepare appropriate entries for High Time Tours from the beginning of the lease through March 31, 2024. Appropriate adjusting entries are made quarterly. Note: If no entor is requ
Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: ⚫ The lease is for 5 years commencing January 1,2023. • ⚫ Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. • • Equipment of this type normally has an economic life of 6 years. • Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this • situation. Crane will not incur any further costs with regard to this lease. ⚫ Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251,626. • ⚫ Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. • • Blossom uses the straight-line method to depreciate similar equipment. ⚫ Both Blossom and Crane have calendar fiscal years (year end December 31),…