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- Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the expiration of the lease, the trucks will revert to the city. 1. Prepare appropriate journal entries in the general fund, the general fixed assets account group, and the general long-term debt account group to record the signing of the lease. 2. Prepare appropriate journal entries in the same fund and account groups to record the first payment on the lease. The city records depreciation on garbage trucks using the straight-line method.Zachariah City's water utility fund enters into a five-year lease for maintenance equipment on July 1, 2022. The City's fiscal year end is December 31, 2022. Assuming lease payments are $50,000, the interest rate is 5%, and the present value of the lease payments is $227,298. 1. Record any necessary entry at the inception of the lease. 2. Record the first lease payment of $50,000 on July 2, 2022. 3. Record any necessary amortization on December 31, 2022. 4. Record the second lease payment of $50,000 on July 2, 2023. Reset. Now show me what these four journal entries would be if it had been the City's general fund that entered into the lease.Assume that a capital lease is initiated by a local governmental unit at 1/1/2021. The payments will be $100,000 per year at the end of each year. Assume that the net present value is $682,500. The implicit rate of interest is 3%. the journal entries for the lease incept on 1/1/2022 using the following assumptions: A governmental fund records the lease A proprietary fund records the lease
- 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…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.Werner Chemical, Incorporated, leased a protein analyzer on September 30, 2024. The five-year lease agreement calls for Werner to make quarterly lease payments of $424,178, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. Werner's incremental borrowing rate is 16%. Amortization is recorded on a straight-line basis at the end of each fiscal year. The useful life of the equipment is five years. 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) Required: 1. Determine the present value of the lease payments on September 30, 2024. 2. What pretax amounts related to the lease would Werner report in its balance sheet on December 31, 2024? 3. What pretax amounts related to the lease would Werner report in its income statement for the year ended December 31, 2024? 4. What pretax amounts related to the lease would Werner report in its statement of cash flows for the…
- Algoma, Inc., signs a five-year lease for office equipment with Office Solutions. The present value of the lease payments is $15,499. Prepare the journal entry that Algoma records at the inception of this finance lease.Company A has agreed to lease two snow plows from Company B. The lease has the following information: • The lease is for three years, requiring annual payments at the beginning of the year of $24,978 (annuity-due basis) • The snow plows have a fair value at the beginning of the lease of $80,000; an estimated economic life of five years; and a guaranteed residual value of $8,900 • Present value of the slow plows is $72,088 • There are no renewal options. At the end of the lease, the snow plows will be returned to Company A Which test does the lease pass in order to be classified as a finance lease? Transfer of ownership O Present value Purchase option Lease termOn January 1, 2024, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $60,000 each, beginning December 31, 2024, and on each December 31 through 2026. The lessor, HVAC Leasing, calculates lease payments based on an annual interest rate of 8%. Winn also paid a $120,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. 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) Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2026. Winn's fiscal year is the calendar year. Note: If no entry is required for a transaction/event,…
- Werner Chemical, Incorporated, leased a protein analyzer on September 30, 2024. The five-year lease agreement calls for Werner to make quarterly lease payments of $355,655, payable each September 30, December 31, March 31, and June 30, with the first payment on September 30, 2024. Werner's incremental borrowing rate is 16%. Amortization is recorded on a straight-line basis at the end of each fiscal year. The useful life of the equipment is five years. 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) Required: Determine the present value of the lease payments on September 30, 2024. What pretax amounts related to the lease would Werner report in its balance sheet on December 31, 2024? What pretax amounts related to the lease would Werner report in its income statement for the year ended December 31, 2024? What pretax amounts related to the lease would Werner report in its statement of cash flows for the year…On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,355 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Amortization is recorded on a straight-line basis at the end of each fiscal year. The fair value of the equipment is $4.9 million. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the present value of the lease payments at June 30, 2021 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2021? 3. What pretax amounts related to the lease would…On January 1, 2021, Winn Heat Transfer leased office space under a three-year lease agreement. The arrangement specified three annual rent payments of $80,000 each, beginning January 1, 2021, the inception of the lease, and at each January 1 through 2023. Winn also paid a $96,000 advance payment at the inception of the lease in addition to the first $80,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $180,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. The implicit rate of the lease is 8% per annum, which is also Winn’s incremental borrowing rate. Required: Prepare the appropriate entries for Winn Heat Transfer from the inception of the lease through the end of 2021. Winn’s financial year is the calendar year. Winn uses straight-line depreciation.