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
Showing posts with label non-cancelable. Show all posts
Showing posts with label non-cancelable. Show all posts
Tuesday, April 12, 2016
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
P21-1 Determining Type of Lease and Subsequent Accounting
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
Wednesday, June 24, 2015
(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
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
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