Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008

E21-6 (Lessor Entries; Sales Type Lease) Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008. The lease is for an 8 year period and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2008. Crosley had purchased the machine during 2007 for $160,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Crosley. Crosley set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 yrs with no residual value and reverts to Crosley at the termination of the lease.

Instructions
Prepare all necessary journal entries for Crosley for 2008.

Click here for the solution: Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2008

(ACC 422 Week 5) On January 1, 2007, Bensen Company leased equipment to Flynn Corporation

ACC 422 Week 5
Chapter 13 and Chapter 21
E21-7 (Lessee-Lessor Entries; Sales-Type Lease) On January 1, 2007, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease.

1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.
2. Equal rental payments are due on January 1 of each year, beginning in 2007.
3. The fair value of the equipment on January 1, 2007, is $150,000, and its cost is $120,000.
4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000. Flynn depreciates all of its equipment on a straight-line basis.
5. Bensen set the annual rental to ensure an 11% rate of return. Flynn’s incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.
6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.

Instructions
(Both the lessor and the lessee’s accounting period ends on December 31.)
(a) Discuss the nature of this lease to Bensen and Flynn.
(b) Calculate the amount of the annual rental payment.
(c) Prepare all the necessary journal entries for Flynn for 2007.
(d) Prepare all the necessary journal entries for Bensen for 2007

Click here for the solution: (ACC 422 Week 5) On January 1, 2007, Bensen Company leased equipment to Flynn Corporation

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011

E 15-4 Direct financing lease; lessor

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080.

Related Information
Lease term 2 years (8 quarterly periods)
Quarterly rental payments $15,000 at the beginning of each period
Economic life of asset 2 years
Fair value of asset $112,080
Implicit interest rate
(Also lessee’s incremental borrowing rate) 8%

Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the inception of the lease through January 1, 2012. Edison's fiscal year ends December 31.

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R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1

R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1. The lease required that T&C give R&J 10 days’ notice before canceling the lease. R&J operated the leased premises as a bar that featured seminude dancers but discontinued the business during the following March when it lost a necessary dance permit. In late March and early April, T&C noticed that the bar was not open and learned that R&J had lost its permit. R&J was behind on its rent at this time. Utility companies were seeking to shut off service to the premises because R&J was also behind on its utility bills. When T&C informed R&J that its monthly rent would be higher if it renewed the lease, R&J said it had no interest in renewing. For the above reasons, T&C took possession of the premises in April. T&C, however, did not give R&J the 10 days’ notice referred to in the lease. T&C leased the premises to a new tenant later that month. At approximately the same time, R&J demanded the return of certain personal property items it had left on the premises. T&C told R&J to contact the new tenant, adding that there should be no problem with the return of the items of personal property. R&J contacted the new tenant, who told R&J to submit a list of its personal property because other parties were also claiming rights to what had been left on the premises. R&J did not submit this list and did not contact T&C again about the personal property items. Later, R&J sued T&C for conversion of the personal property. Did R&J have a valid conversion claim?

Click here for the solution: R&J Associates leased certain commercial real estate from T&C Associates, Inc., for a one-year period beginning May 1