Ivanhoe Manufacturing Ltd. has signed a lease agreement with Oriole Leasing Inc. to lease some specialized manufacturingequipment. The terms of the lease are as follows:The lease is for 5 years commencing January 1, 2023.Ivanhoe must pay Oriole $54,114 on January 1 of each year, beginning in 2023.Equipment of this type normally has an economic life of 6 years.Oriole has concluded, based on its review of Ivanhoe's financial statements, that there is no unusual credit risk in thissituation. Oriole will not incur any further costs with regard to this lease.Oriole purchases this equipment directly from the manufacturer at a cost of $202,026, and normally sells the equipment for$251,626.Ivanhoe's borrowing rate is 7% Oriole's implied interest rate is 6%, which is known to Ivanhoe at the time of negotiating thelease.Ivanhoe uses the straight-line method to depreciate similar equipment.Both Ivanhoe and Oriole have calendar fiscal years (year end December 31), and follow ASPE.Click here to view the factor table PRESENT VALUE OF 1.Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.(a)Your answer is correct.From Ivanhoe Manufacturing's perspective, is this a capital or operating lease?Ivanhoe will classify this as a(n) capital leaseeTextbook and MediaList of Accounts(c)Your Answer Correct Answer (Used)Prepare a lease amortization schedule for this lease. (Round answers to O decimal places, e.g. 5,275.)(d)PaymentInterestPrincipal$54,114$$D54,11454,11454,11411.25142,8638.67945,43554,1145,95354.1143.06348,16151,053270,57028,946$241,626Attempts: 1 of 3 usedBalanceYour answer is partially correct.Prepare the journal entries on Ivanhoe Manufacturing's books on January 1, 2023. (List all debit entries before credit entries. Creditaccount titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" forthe account titles and enter O for the amounts.)Date Account Titles and ExplanationJan.1,Lease Receivable2023Sales Revenue(To record inception of lease)CashLease Receivable(To record lease payment)Debit5411454114Credit5411454114

Lease is a financial arrangement in which lessor provides a right of use of asset to the lessee. In…

Answered: Ivanhoe Manufacturing Ltd. has signed a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Telor, a private company that follows ASPE, entered into a lease agreement with Global Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Telor signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Global Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Telor does not know the implicit rate of the lease; Telor's incremental borrowing rate is 10%. Telor uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Telor. Round amounts to the nearest dollar.
Kirkland Manufacturing Ltd. (lessee) has signed a lease agreement with VPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: The lease is for 5 years starting January 1, 2020. - Kirkland must pay VPN $54,114 on January 1 of each year, beginning in 2020. - Equipment of this type normally has an economic life of 6 years. - VPN has concluded, based on its review of Kirkland’s financial statements, that there is no unusual credit risk in this situation. VPN will not incur any further costs with regard to this lease. - VPN purchases this equipment directly from the manufacturer at a cost of $202,025 and normally sells the equipment for $241,625. - Kirkland’s borrowing rate is 7%. - Kirkland uses the straight-line method to depreciate similar equipment. - Both Kirkland and VPN have calendar fiscal years (year end December 31), and follow ASPE. Determine the depreciation expense for Kirkland Manufacturing for 2020: Select one: a.…
Blossom Manufacturing Ltd. has signed a lease agreement with Crane Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows: ⚫ The lease is for 5 years commencing January 1,2023. • ⚫ Blossom must pay Crane $54,114 on January 1 of each year, beginning in 2023. • • Equipment of this type normally has an economic life of 6 years. • Crane has concluded, based on its review of Blossom's financial statements, that there is no unusual credit risk in this • situation. Crane will not incur any further costs with regard to this lease. ⚫ Crane purchases this equipment directly from the manufacturer at a cost of $214,026, and normally sells the equipment for $251,626. • ⚫ Blossom's borrowing rate is 7%. Crane's implied interest rate is 6%, which is known to Blossom at the time of negotiating the lease. • • Blossom uses the straight-line method to depreciate similar equipment. ⚫ Both Blossom and Crane have calendar fiscal years (year end December 31),…
Allied Industries manufactures high-performance conveyers that often are leased to industrial customers. On December 31, 2016, Allied leased a conveyer to Poole Carrier Corporation for a three-year period ending December 31, 2019, at which time possession of the leased asset will revert back to Allied. Equal payments under the lease are $200,000 and are due on December 31 of each year. The first payment was made on December 31, 2016. Collectibility of the remaining lease payments is reasonably assured, and Allied has no material cost uncertainties. The conveyer cost $450,000 to manufacture and has an expected useful life of six years. Its normal sales price is $659,805. The expected residual value of $150,000 at December 31, 2019, is guaranteed by United Assurance Group. Poole Carrier’s incremental borrowing rate and the interest rate implicit in the lease payments are 10%. Required: 1. Show how Allied Industries calculated the $200,000 annual lease payments. 2. How should this lease…
Sheridan Company, a machinery dealer, leased a machine to Sunland Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2025. Sheridan had purchased the machine during 2024 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $
Sarasota Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $170,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. The lease requires payments of $38,073 at the beginning of each year starting January 1, 2019. At the end of the lease term, the equipment is to be returned to the lessor. Lantus' implied interest rate is 6%, while Sarasota's borrowing rate is 7%. Sarasota uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assuming that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Show Transcribed Text Date Jan. 1, 2019 Dec. 31, 2019 Account Titles and Explanation Equipment Acquired for Lessee (To record purchase of equipment.) (To record…
Crane Corporation manufactures drones. On December 31, 2024, it leased to Blossom Company a drone that had cost $100,000 to manufacture. The lease agreement covers the 5-year useful life of the drone and requires 5 equal annual rentals of $40,200 payable each December 31, beginning December 31, 2024. An interest rate of 11% is implicit in the lease agreement. Collectibility of the rentals is probable. Prepare Crane's December 31, 2024, journal entries. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places eg. 5,275.) Click here to view factor tables. Date December 31, 2024 December 31, 2024 Account Titles and Explanation (To record the lease) Debit Credit
Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…
Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $32,055 at the beginning of each year. The first payment is received on January 1, 2025. Wildhorse had purchased the machine during 2024 for $129,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. Click here to view factor tables. (a) * Your answer is incorrect. Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable 256440
Sandhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on January 1, 2025. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable. Sandhill set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sandhill at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (for calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable eTextbook and Media List of Accounts
Marigold Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $196,000. The terms of the lease are as follows: ● The lease term begins on January 1, 2019, and runs for 5 years. ● The lease requires payments of $43,896 at the beginning of each year starting January 1, 2019. ● At the end of the lease term, the equipment is to be returned to the lessor. ● Lantus’ implied interest rate is 6%, while Marigold’s borrowing rate is 7%. Marigold uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE.Determine the present value of the minimum lease payments. Present value please show me how to do the calculation in exce
Gopher Company leased an asset from Harry Company on December 31, 2018, with payments of $62,000 due each December 31 for six years, starting on December 31, 2018. The asset will be returned to Harry Company at the end of the lease term. Gopher has determined that none of the five lease classification criteria are met, so Gopher will classify the lease as an operating lease. Gopher's fiscal year ends on December 31. With these lease payments and Harry's implicit rate of 9%, the right-of-use asset is originally calculated to be $303,158. Make all of Gopher's journal entries for this lease for the following dates (clearly labeling each entry by date): December 31, 2019 and December 31, 2020 (while you are not asked to make the journal entries for December 31, 2018, you should consider them). Show your work.

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