The following information is available for a non-cancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee

E21-9 Lessee and Lessor Accounting Issues

The following information is available for a non-cancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee. Assume that the lease payments are made at the ginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a three-year life.

REQUIRED:
1. Record the lease (including the initial receipt of $2,000) and the receipt of the second and third installments of $2,000 in the accounts of the Anson Company. Carry computations to the nearest dollar.

Click here for the solution: The following information is available for a non-cancelable lease of equipment that is classified as a sales-type lease by the lessor and as a capital lease by the lessee

(Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine

Exercise 21-1 (E21-1) (Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine. The terms of the lease called for Adams to make annual payments of $ 9,968 at the beginning of each year, starting 01/01/11. The machine has an estimated useful life of six years and a $ 5,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Adams uses the straight-line method of depreciation for all of its plant assets. Adam's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown.

Instructions:
(A.) What type of lease is this? Explain
(B.) Compute the present value of the minimum lease payments.
(C.) Prepare all necessary journal entries for Adams for this lease through January 1, 2012

Click here for the solution: (Lessee Entries, Capital lease with Unguaranteed Residual Value) On January 1, 2011, Adams Corporation signed a 5-year non-cancelable lease for a machine

Brecker Company lease an automobile with a fair value of $10,906 from Emporia Motors, Inc, on the following terms

Exercise 21-2 (E21-2) (Lessee Computation and Entries, Capital Lease with Guaranteed Residual Value) Brecker Company lease an automobile with a fair value of $10,906 from Emporia Motors, Inc, on the following terms:

1. Noncancelable term of 50 months
2. Rental of $250 per month (at end of each month). (The present value at 1% per month is $9,800.)
3. Estimated residual value after 50 months is $ 1,180.(the present value at 1% per month is $715.) Brecker Company guarantees the residual value of $ 1,180.
4. Estimated economic life of the automobile is 60 months
5. Brecker Company's incremental borrowing rate is 12% a year (1% a month). Emporia's implicit rate is unknown.

Instructions:
(a.) What is the nature of the lease to Brecker Company?
(b.) What is the present value of the minimum lease payments?
(c.) Record the lease on Brecker Company's books a the date of inception.
(d.) Record the first month's depreciation on Brecker Company's books (assume straight lined)
(e.) Record the first month's lease payment.

Click here for the solution: Brecker Company lease an automobile with a fair value of $10,906 from Emporia Motors, Inc, on the following terms