Sassy Company enters into a five-year lease agreement with Corral Company (lessor) over equipment on December 31, 2014. The provisions in the lease are as follows: Island Company will pay P250,000 per year; has the option to purchase the equipment at the end of the five-year period for P100,000 and if the company does not purchase the equipment, it must return to the lessor. Base on the fair value of the asset of P800,000, the periodic rentals of P250,000, and the unguaranteed residual value of P100,000 and based on these variables, the implicit rate of the lease is 19.34%. What should be the carrying value of the lease liability on December 31, 2017? 385 022 532 122 655 364 758 643

Sassy Company enters into a five-year lease agreement with Corral Company (lessor) over equipment on December 31, 2014. The provisions in the lease are as follows: Island Company will pay P250,000 per year; has the option to purchase the equipment at the end of the five-year period for P100,000 and if the company does not purchase the equipment, it must return to the lessor. Base on the fair value of the asset of P800,000, the periodic rentals of P250,000, and the unguaranteed residual value of P100,000 and based on these variables, the implicit rate of the lease is 19.34%. What should be the carrying value of the lease liability on December 31, 2017? 385 022 532 122 655 364 758 643

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 13E: Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with...

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Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.
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CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery for four years beginning on 1 January 20X0. The lease requires four annual payments of €28,679 starting on 1 January 20X0. The useful life of the machine is four years, and its salvage value is zero. CAPBS follows US GAAP and accounts for the lease as a finance lease. The fair value of the machine is €100,000. The present value of the lease payments using the company's discount rate of 10 percent is €100,000. The company uses straight-line depreciation. 1. What is the amount of the machinery reported as a leased asset on the balance sheet on 31 December 20X0?
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CAPBS Inc. enters into a lease agreement to acquire the use of a piece of machinery forfour years beginning on 1 January 2010. Th e lease requires four annual payments of€28,679 starting on 1 January 2010. Th e useful life of the machine is four years, and itssalvage value is zero. CAPBS accounts for the lease as a fi nance lease. Th e fair value ofthe machine is €100,000. Th e present value of the lease payments using the company’sdiscount rate of 10 percent is €100,000. (A reminder is relevant for present value calculations: Lease payments are made at the beginning of each period.) Th e company usesstraight-line depreciation.1 . Comment on the appropriateness of CAPBS treating the lease agreement as afi nance lease under IFRS and a capital lease under US GAAP.2 . What is the amount reported as a leased asset on the balance sheet on 1 January2010? What depreciation expense is reported in fi scal year 2010?3 . What is the amount of the machinery reported as a leased asset on the…
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Pina Leasing Company agrees to lease equipment to Grouper Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $475,000, and the fair value of the asset on January 1, 2025, is $681,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Grouper estimates that the expected residual value at the end of the lease term will be $50,000. Grouper amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Pina desires a 9% rate of return on its investments. Grouper's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December…
Ivanhoe Leasing Company agrees to lease equipment to Shamrock Corporation on January 1, 2025. The following information relates to the lease agreement. 1. 2. 3. 4. 5. 6. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $569,000, and the fair value of the asset on January 1, 2025, is $682,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Shamrock estimates that the expected residual value at the end of the lease term will be $55,000. Shamrock amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. The collectibility of the lease payments is probable. Ivanhoe desires a 9% rate of return on its investments. Shamrock's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on…
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