Oriole Cosmetics, Inc. has entered into a leasing agreement to rent equipment from Culver Leasing services. There is no transfer oftitle, there is not a bargain purchase option, and the economic life test is not met. Based on the following information, what amountwould be used in the 90% test for the present value of the lease payments for the lessee?Annual Payments (1st day of the period) $51300Lease Term5 years$12300Guaranteed Residual ValueIncremental Borrowing Rate(lessor implicit rate is not known)6%, 5 periods8%, 5 periods10%, 5 periods$221212$256500$229583O $268800PV Annuity Due4.465114.312134.16986eTextbook and Media8%PV Ordinary Annuity4.212363.992713.79079PV Single Sum0.747260.680580.62092

Answered: Image /qna-images/answer/82e15e95-7061-48ed-a2bf-47365870c082.jpg

Answered: Cosmetics, Inc. has entered into a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 01, 2012, PC Options sold equipment to PC Madness and simultaneously leased it back. Pertinent information at this date are presented below. In the initial entry upon leaseback, how much is the gain to be recognized by the buyer-lessor? * Sales price P 9,000,000 Fair value 8,000,000 Carrying amount 7,200,000 Annual rental payable at the end of each year 600,000 Remaining life 20 Lease term 4 Interest rate on the lease contract 12% Borrowing rate of PC Options 11% Borrowing rate of PC Madness 10.50% a. P800,000 O b. P720,000 O c. P400,000 O d. P717,780
Scape Corp. manufactures hi-tech equipment. Scape leased equipment to User, Inc., on January 1, 2019. Scape manufactured the equipment at a cost of $3,700,000. Lease description: Annual rental payments $1,000,000 at beginning of each period Lease term 5 years No Bargain Purchase – Or special use at the end Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset Expected Life of the Asset (SL depreciation with no salvage value) $6,000,000 6 years Prepare appropriate entries for both User and Scape from the inception of the lease through the end of the first fiscal year (December 31).
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $334.936. Other information: 5 years $79,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $334,936 Implicit interest rate 9% Incremental rate 9% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 > Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $247,570. Other information: Lease term Annual payments Life of asset 4 years $71,000 on January 1 each year Incremental rate 4 years Fair value of asset Implicit interest rate 10% $247,570 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: January 1 Payments $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 2024 2025 2026 2027 2028 2029 2030 2041 2042 2043 $ 22,000 $ 22,000 $ 22,000 Effective Interest $ 18,403 $ 18,043 $ 17,647 $ 17,212 1. Lease liability 2. Right-of-use asset 3. Lease term $ 16,733 $ 16,207 $ 5,471 $ 3,818 $ 2,000 Decrease in Balance $ 22,000 $ 3,597 $ 3,957 $ 4,353 $ 4,788 $ 5,267 $ 5,793 4. Effective annual interest rate 5. Total of lease payments 6. Total effective interest expense $ 16,529 $ 18,182 $ 20,000 Outstanding Balance $ 206,028 $ 184,028 $ 180,431 $ 176,474 $ 172, 121 $ 167,333 $ 162,067 $ 156,273 Required: 1. What is Majestic's lease liability at the…
On January 1, 2021, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing's lease amortization schedule appear below: Effective Decrease in Outstanding Jan. 1 Payments Interest Balance Balance 236,474 2021 26,000 26,000 210,474 2022 26,000 22,100 3,900 206,574 2023 26,000 21,690 4,310 202,264 2024…
At the beginning of the current year, a company leased computer equipment to another company under a direct financing lease.The equipment has no residual value at the end of the lease and the lease does not contain bargain purchase option.The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P3,234,000. The present value of an annuity due of 1 at 8% for 5 years is 4.312.What is the interest revenue for the current year?
On January 1, 2024, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance 2024 $ 244,813 2024 $ 27,000 $ 27,000 $ 217,813 2025 $ 27,000 $ 23,959 $ 3,041 $ 214,772 2026 $ 27,000 $ 23,625 $ 3,375 $ 211,397 2027 $ 27,000 $ 23,254 $ 3,746 $ 207,651 2028 $ 27,000 $ 22,842 $ 4,158 $ 203,493 2029 $ 27,000 $ 22,384 $ 4,616 $ 198,877 — — — — — — — — — — — — — — — 2041 $ 27,000 $ 10,852 $ 16,148 $ 82,505 2042 $ 27,000 $ 9,076 $ 17,924 $ 64,581 2043 $ 27,000 $ 7,104 $ 19,896 $ 44,685 2044 $ 49,600 $ 4,915 $ 44,685 $ 0 What is the asset’s residual value expected at the end of the lease term? What is the effective…
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: 5 years $88,000 on January 1 each year 5 years Lease term Annual payments Life of asset Fair value of asset $366,951 Implicit interest rate 10% Incrementa1 rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.) View transaction list Journal entry worksheet 1 2 3 Record the entry at the inception of the lease. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018
On January 1, 2024, National Insulation Corporation (NIC) leased equipment from United Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by NIC. Portions of the United Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance 2024 $ 244,813 2024 $ 27,000 $ 27,000 $ 217,813 2025 $ 27,000 $ 23,959 $ 3,041 $ 214,772 2026 $ 27,000 $ 23,625 $ 3,375 $ 211,397 2027 $ 27,000 $ 23,254 $ 3,746 $ 207,651 2028 $ 27,000 $ 22,842 $ 4,158 $ 203,493 2029 $ 27,000 $ 22,384 $ 4,616 $ 198,877 — — — — — — — — — — — — — — — 2041 $ 27,000 $ 10,852 $ 16,148 $ 82,505 2042 $ 27,000 $ 9,076 $ 17,924 $ 64,581 2043 $ 27,000 $ 7,104 $ 19,896 $ 44,685 2044 $ 49,600 $ 4,915 $ 44,685 $ 0 What is the lease term in years? 20 years What is the asset’s residual value expected at the end…
Crane corporation owns equipment that cost $65, 600 and has a useful lofe of 8 years with no dalvage value. On July 1, 2025 Crane leases the equipment to Cullumber INC for one rental psyment of $12, 300 on January 1. Assuming Cullimber (lessee) elects to use the short term lease exception, prepare Cullumbers 2025 joirnal entry
Happy Company purchased a packing machine intended for leasing at a cost of P330,000. The machine was leased to Great Company on January 1, 2021, at an annual rental of P58,860 payable in advance over a period of 10 years. The lease qualifies as a direct financing lease. There is no expected residual value for the asset. Implicit interest rate is 16%. Happy Company uses the calendar year. What is the amount of interest revenue recognized in profit or loss by Happy Company for the years 2021 and 2022? A. P43,382 and P40,906 B. P52,800 and P51,830 C. P43,832 and P40,609 D. P52,800 and P51,380

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