Purchase cost of equipment Annual operating costs Immediate deposit. Annual lease payments Salvage value (5 years from now) $ 12,000 Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice O If the company chooses the lease option, it will have to pay an immediate deposit of $25,000 to cover any future damages to the equipment. The deposit is refundable at the end of the lease term. The annual lease payments are made at the end of each year. Based on a net present value analysis with a discount rate of 22%, what is the financial advantage (disadvantage) of buying the equipment rather than leasing it? O O $(6,272) $(5,442) Lease $(2,462) $(4,952) Buy $ 60,000 $ 6,000 $ 25,000 $ 18,000
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- How much is the cost of the right of use asset at the inception of the lease? (All required entries are to be written in the columnar worksheet together with the computations and the computation of the right of use asset that is written in the google form. Lease term 10 years Annual rental payable at the end of each term P240,000 Estimated life of machine 12 years Implicit interest rate 10% Present value of an annuity of P1 for 10 period at 10% 6.145 Present value of 1 at 10% for 10 periods 0.386 Unguaranteed residual value 150,000 Payment to lessor to obtain a long term lease 30,000 Annual maintenance cost…Please use Excel Broncos Company leased equipment from Wilson-Tech Leasing on January 1, 2022.Other information:Lease term 3 yearsAnnual payments $40,000 on January 1 each yearLife of asset 3 yearsImplicit interest rate 8%There is no expected residual value.Required: 1. Using the Excel (not formula or PV tables), compute the amount of Right-of-Use Asset as thepresent value of future lease payments. Explain how you compute this PV. 2. Prepare appropriate journal entries for Broncos for 2022. Assume straight-line amortizationand a December 31 year-end. Round your answers to the nearest whole dollar amounts. January 1, 2022: December 31, 2022:Saved Help Seve & On January 1, 2021, Obermax Corporation agreed to lease a piece of equipment to a customer for 10 years. The lease qualified as a finance/sales-type lease with a 6% implicit interest rate. The customer agreed to make a payment of $8,000 at the beginning of each year, the first payment being made on January 1, 2021. The journal entry Obermax should recognize at the inception of the lease includes: Multiple Choice a debit to lease receivable of $80,000. a debit to lease receivable of S62,414. a credit to interest revenue of $3,265. a debit to lease receivable of $58.881.
- Hi, Please help to determine present value of lease payments (lessee) considering the following: Project 2.2 Topic: Leases Part 2 Illini leases another piece of equipment from Cubs Corporation under a four-year lease agreement on 1/1/20x1. The lease specifies annual payments on each 1/1 and the first payment of $10,000 is made on 1/1/20x1. The lease also specifies a 3% annual increase in the lease payments. The equipment has a fair value of $100,000 on 1/1/20x1. The expected useful life of the equipment is 10 years with no residual value. The equipment will be returned to Cubs at the end of the lease term. The implicit rate is 10%. Project 2.2 Part 2 Ledger Date Account Name Debit Credit 1/1/20x1 ROU assets [A] Lease obligation [B]Lessor Accounting with Guaranteed Residual Value Use the information for Edom Company in E20-8, except that the residual value was guaranteed by Davis Company (the lessee). Required: 1. Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by Edom. 3. Prepare journal entries for Edom tor the years 2019 and 2020.Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides for it to lease computers from Appleton Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers are not specialized for Sax. 2. The computers have an estimated life of 5 years, a fair value of 300,000, and a zero estimated residual value. 3. Sax agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. The annual payment is set by Appleton at 83,222.92 to earn a rate of return of 12% on its net investment. Sax is aware of this rate. Saxs incremental borrowing rate is 10%. 6. Sax uses the straight-line method to record depreciation on similar equipment. Required: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Sax. 2. Calculate the amount of the asset and liability of Sax at the inception of the lease (round to the nearest dollar). 3. Prepare a table summarizing the lease payments and interest expense. 4. Prepare journal entries for Sax for the years 2019 and 2020.
- Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a 5-year, noncancelable, sales-type lease on January 1, 2019, for equipment that cost Lessor 375,000 (useful life is 5 years). The fair value of the equipment is 400,000. Lessor expects a 12% return on the cost of the asset over the 5-year period of the lease. The equipment will have an estimated unguaranteed residual value of 20,000 at the end of the fifth year of the lease. The lease provisions require 5 equal annual amounts, payable each January 1, beginning with January 1, 2019. Lessee pays all executory costs directly to a third party. The equipment reverts to the lessor at the termination of the lease. Assume there are no initial direct costs, and the lessor expects to be able to collect all lease payments. Required: 1. Show how Lessor should compute the annual rental amounts. 2. Prepare a table summarizing the lease and interest receipts that would be suitable for Lessor. 3. Prepare a table showing the accretion of the unguaranteed residual asset. 4. Prepare the journal entries for Lessor for the years 2019, 2020, and 2021.mpany purchaseda Problem 10-32 (IFRS) under a finance At the beginning of current year, Southstar Company leased a building with the following information: ity were originally Annual rental payable at the end of each lease year Initial direct cost paid Lease incentive received Lease bonus paid to lessor before commencement of lease Present value of cost of restoring the building as required by contract discounted at 8% Purchase option that is reasonably certain Lease term Useful life of building Implicit inierest rate Present value of an ordinary annuity of 1 at 10% for 6 periods Present value of 1 at 10% for 6 periods 1,500,000 405,000 50,000 300,000 lated depreciation and the remaining 0,000. -P1,500,000 cash. 945,000 1,000,000 6 years 10 years 10% 4.36 0.56 of the machinery 1. What amount should be recorded initially as cost of right of use asset? a. 8,750,000 b. 8,700,000 c. 9,900,000 d. 7,755,000 2. What amount should be recorded as annual depreciation of the right of the asset?…
- Required information ABC Corp. manufactured equipment and then leased the equipment to XYZ Corp. on January 1, 2021. Additional details: Annual payments Lease term Useful life of asset Implicit interest rate Present value of lease payments Lease classification $30,000 12 years 16 years 8.0% $244,169 Finance lease The first payment occurs on January 1, 2021, and at each December 31 thereafter. The lease does not transfer ownership at lease-end, and there is no bargain purchase option. (Round final answers to the nearest whole dollar.) Use the information above to answer the questions below. What is the balance of the lease after the first lease payment? Balance of lease after first payment:Broncos Company leased equipment from Wilson-Tech Leasing on January 1, 2022.Other information:Lease term 3 yearsAnnual payments $40,000 on January 1 each yearLife of asset 3 yearsImplicit interest rate 8%There is no expected residual value.Required: 1. Using the Excel (not formula or PV tables), compute the amount of Right-of-Use Asset as the present value of future lease payments. Explain how you compute this PV. 2. Prepare appropriate journal entries for Broncos for 2022. Assume straight-line amortization and a December 31 year-end. Round your answers to the nearest whole dollar amounts.January 1, 2022: December 31, 2022:Question 4 On January 1, 2019, the Okanagan Flight Institute, which reports its financial results in accordance with ASPE, entered into a contract to lease a flight simulator, details of which follow: Lease term Economic life of equipment Lease payment Fair value of asset Implicit rate in the lease (not known by lessee) Incremental borrowing rate Option to purchase Guaranteed residual value Year end is December 31 Expected payout under guarantee 5 years 7 years $7,800, first due January 1, 2019 $40,000 6% 7% No $5,000 $0 Required: a) Evaluate this term from the perspective of Okanagan Flight Institute using the four primaryASPE criteria. Should it classify the lease as a finance lease or an operating lease? b) Using Excel, prepare an asset depreciation schedule that covers the useful life of the equipment using straight-line depreciation. c) Prepare a lease liability amortization schedule for the life of the lease using Excel. d) Prepare all journal entries for Okanagan Flight…