Direct Finance Lease - Lessor (PAS 17 and PFRS 16)Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details:Cost of MachineryResidual value – guaranteedUseful life and lease termP3,760,100400,0004 years10%Implicit interest rateAnnual rental is payable in advance on January 1Required: Based on the result of your audit, determine the following:1. Annual Rental2. Gross Receivable or Investment3. Unearned Interest4. Interest Income on 20115. Carrying Value of Lease Receivable on January 1,2012

Annual Rental: The annual rental can be calculated as follows: Cost of Machinery / (1 + Implicit…

Answered: Direct Finance Lease - Lessor (PAS 17…

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

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Direct Finance Lease – Lessor (PAS 17 and PFRS 16)Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details:Cost of Machinery P3,760,100Residual value – guaranteed 400,000Useful life and lease term 4 yearsImplicit interest rate 10%Annual rental is payable in advance on January 1Required: Based on the result of your audit, determine the following:____________1. Annual Rental____________2. Gross Receivable or Investment____________3. Unearned Interest____________4. Interest Income on 2011____________5. Carrying Value of Lease Receivable on January 1,2012
4. What amount should be reported as gross profit on sale? of current year, an equipment was leased to another entity France Company is a dealer in equipment. At the beginning Problem 14-15 (IAA) with the following provisions: Annual rental payable at the end of each year Lease term and useful life of machinery Cost of equipment Residual value-unguaranteed Implicit interest rate PV of an ordinary annuity of 1 at 12% for 5 periods PV of 1 at 12% for 5 periods 1,500,000 5 years 4,000,000 500,000 12% 3.60 0.57 At the end of the lease term the equipment will revert to the lessor. The entity incurred initial direct cost of P200,000 in finalizing the lease agreement. 1. What is the gross investment in the lease? a. 7,500,000 b. 8,000,000 c. 4,000,000 d. 4,500,000 2. What is the net investment in the lease? a. - 5,400,000 b. 5,685,000 c. 4,000,000 d. 3,500,000 3. What interest income should be reported for current year? а. 682,200 b. 648,000 c. 900,000 d. 960,000 a. 1,485,000 b. 1,685,000 c.…
TOPIC: LEASESCompute for the following (show solution):a. Manufacturer's profit recognized in the year 2020.b. Total financial revenue pertaining to the lease.c. Interest Revenue recognized in the year 2020.d. Net Finance lease Receivable balance, December 31, 2020.
12:08 In your audit of XYZ Co., you noted a P1,100,000 balance under the rent expense account which was recorded on December 31, 2021. Upon examination of lease contract, you found that this pertains to an 8-year lease contract with a lessor beginning January 1, 2021. The payments are due every December 31 of each year beginning. December 31, 2021. The asset is expected to be sold for P500,000 after its estimated useful life of 10 years. The lease contract provided the lessee an option to purchase the underlying asset for P200,000 at the end of its lease term. Based on assessment, there is reasonable certainty that the option will be exercised by the lessee. Furthermore, the annual payments include P100,000 reimbursement to the lessor for maintenance costs incurred on behalf of the lessee. The lease has an implicit rate of 8% which was known to the lessee. Required: a. Prepare a working paper showing computations for (a) initial measurement of the lease liability and right of use…
ESSAY: Direction: Explain the following statements/question in not less than 5 sentences. 1. Explain the following:a. Leases b. Insurance contracts Solve the following problem. Show your solutions.2. On January 1, 20x1, Entity X enters into a 3-year lease of equipment for an annual rent of 100,000 payable at the end of each year. The equipment has a ₱ remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight- line method of depreciation. The relevant present value factors are as follows: - PV of an ordinary annuity of 1 @10%, n=3............ 2.48685 ₱- PV of an ordinary annuity of 1 @12%, n=3............ 2.40183 ₱ How much is the lease liability to be recognized by Entity X on initial recognition?
Reporting Finance Lease, Guaranteed Residual-Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $50,000, and the property reverts to Mac at the end of the lease term. Lease payments of $11,923 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $10,000. The lease contains no purchase option. Requireda. How would Ash Corporation classify the lease? Finance Lease b. What is the lease liability balance on January 1, the lease commencement date? Note: Round your answer to the nearest whole dollar. $ Estimated Residual = Guaranteed Residual, Estimated Residual < Guaranteed Residual Note: Round your…
On July 01, 2011, a company leased a piece of land under a 3-year lease. Total rent for the term of the lease will be P3,600,000 payable as follows. All payments were made when due. How much is the lessor's rent revenue for the fiscal year ended June 30, 2012 suppose it classifies the lease as an operating lease? a. P600,000 b. P900,000 c. P1,200,000 d. P2,100,000
On January 1, 20X4, Kangaroo Inc. (KI) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow: Lease payment, including maintenance agreement Maintenance agreement included in lease payment Implicit rate in the lease (not known) Incremental borrowing rate Lease term. Economic life of equipment Guaranteed residual value Expected pay-out on residual value guarantee Option to purchase First annual payment due $85,000 $3,000 4% 5% 6 years 7 years $20,000 $6,000 No Commencement date KI's year-end is December 31. Kl elects to adopt the practical expedient available to it and not to separately report the lease and non-lease components in the contract. What is the amount that it will record for depreciation of this right-of-use asset for its year-ended December 31, 20X4? a $77.988 b $65.355 $76.247 d. $73.582.
After the fourth year, the residual value was estimated at The lease provided for a transfer of title to the lessee at the and four year-end rental payments. The lease qualified as a Module4_Lease.pdf x of the asset was P7,994,000. Terms of the lease specify four-year life for the lease, an annual interest rate of 15% Ericson Company leased an asset to another entity. The coet 12 / 19 100% Problem 13-13 (IAA) direct financing lease.. The lease provided for a transfer of title to the lessee After the fourth year, the residual value was estimated P1,000,000. The PV of 1 at 15% for 4 periods is .572, and the PV of a ordinary annuity of 1 at 15% for 4 periods is 2.855. What is the annual rental payment? a. 2,000,000 b. 3,000,350 c. 2,800,000 d. 2,599,650
In your audit of Entity A, you noted that the Rent expense account has an ending balance of $1,100,000 at December 31, 2021. $100,000 of this pertains to the maintenance costs paid by the Lessor on behalf of Entity A, which was later paid by Entity A. The lease commenced on January 1, 2021. The following are the terms of agreement. Terms of the Lease Agreement Lease term 8 years Useful life 10 years Annual rental payments due at the end of the year $1,000,000 Residual value at the end of useful life $500,000 Bargain purchase option 200,000 Maintenance costs reimbursed to lessor 100,000 8% Implicit rate Note: There is reasonable certainty that the purchase option will be exercised by Entity A at the end of the lease term Required: 1. Compute for the (a) initial lease liability and the cost of the right-of-use asset, (b) Depreciable amount to be used and depreciation expense (c) Carrying amount of the lease liability and the right- of-use asset at the end of the year. 2. Show adjusting…
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: 2 years (8 quarterly periods) $15,000 at the beginning of each period 2 years $112,080 8% Lease term Quarterly rental payments Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the inception of the lease through January 1, 2012. Edison's financial year ends December 31.
On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales-type lease designed to earn Lesco a 14% rate of return for providing long-term financing. The lease agreement specified: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1). a. Ten annual payments of $59,000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $321,104. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $59,000 payments is an insurance premium…

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