e payments of $12,000 with the first payment due December 31. Id have financed a purchase of the machine with a 8% loan. a. Rep ries that Rockford Corporation would make on January 1 and Dece ord this lease assuming it is reported as an operating lease.
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- Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. Assume that Garvey is required to make payments on December 31 each year.Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on the following terms: 1. Twenty-four lease rentals of 2,950 at the beginning of each month are to be paid by Terrell, and the lease is noncancelable. 2. The cost of the heavy equipment to Ramsey was 55,000. 3. Ramsey uses an implicit interest rate of 18% per year and will account for this lease as a sales-type lease. Required: Prepare journal entries for Ramsey (the lessor) to record the lease contract on March 1, 2019, the receipt of the first two lease rentals, and any interest income for March and April 2019. (Round your answers to the nearest dollar.)
- Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.Elliott Brothers enters into a lease agreement with Central Leasing for a piece of equipment. The terms of the 5-year lease state that payments of $19,500 will be made annually on January 1, commencing with the date that the lease begins. The lease contains a provision that Elliott Brothers may purchase the equipment at the end of the lease period for $19,000, which is well below the expected fair value at the end of the lease. As such, it is expected that Elliott Brothers will exercise this option. The implicit rate in the lease is 9%. If this lease is treated as a finance lease for Elliott Brothers, at what value will the right-of-use asset be recorded? Group of answer choices $12,349 $95,024 $75,848 $82,675On January 1, Year 1, Robin Corp. signs a contract to lease non-specialized manufacturing equipment from Owl, Inc. Robin agrees to make lease payments of $36,000 per year. Additional information pertaining to the lease is as follows: 1. The term of the noncancelable lease is four years. Payments are due every December 31, beginning December 31, Year 1. Owl expects to collect all lease payments. 2. The fair value of the manufacturing equipment on January 1, Year 1, is $150,000. The equipment has an economic life of seven years. 3. The equipment has an estimated residual value of $15,000 at the end of the lease term. This amount is not guaranteed by Robin. 4. Both Robin and Owl depreciate similar assets using the straight-line method. 5. Robin's incremental borrowing rate is 8% per year; Owl's implicit interest rate is 6% and is known by Robin. 6. Robin pays $1,100 per year for maintenance of the equipment directly to an applicable third party. 7. Assume that this is an operating lease…
- Rockford Industries, a manufacturing company, signs a six-year lease on a packaging machine on January 1. The lease requires Rockford to make annual lease payments of $12,000 with the first payment due December 31. Rockford could have financed a purchase of the machine with a 8% loan. a. Report the entries that Rockford Corporation would make on January 1 and December 31 to record this lease assuming it is reported as an operating lease. Round all calculations to the nearest whole dollar. Date Jan. 1 Account To record the start of the operating lease. Dec. 31 Lease expense Cash To record the lease payment. Dec. 31 Debit Credit To record the lease expense. b. Report the entries that Rockford Corporation would make on January 1 and December 31 to record this lease assuming it is reported as a finance lease. Round all calculations to the nearest whole dollar. Date Account Jan. 1 To record the start of the finance lease. Dec. 31 To record the amortization of leased asset. Dec. 31 To record…On June 30, 2021, Hercule, Inc. leased warehouse equipment from Marble, Inc. The lease agreement calls for Hercule to make semiannual lease payments of $1,828,052 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Hercule's incremental borrowing rate is 6%, the same rate Marble used to calculate lease payment amounts. Marble manufactured the equipment at a cost of $9.5 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 price at which Marble is "selling" the equipment (present value of the lease payments) at June 30, 2021. 2. What amounts related to the lease would Marble report in its balance sheet at December 31, 2021? (Ignore taxes.) 3. What would be the net effect of the lease that Marble would report in its income statement for the year ended December 31, 2021? (Ignore taxes.) (For all requirements, round your…At the beginning of the current year, CPA Co, leased a machine to CMA Co. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual payments of P1,750,000 are made each December 31. The machine reverts to lessor at the end of the lease term, at which the residual value of the machine will be P275,000 which is unguaranteed.Required: Write answer without peso sign withcommas.What is the total financial revenue?
- On January 1, 2024, QuickStream Communications leased telephone equipmen for Digium, Incorporated Digium's cash selling price for the equipment is $1,987,838. The lease agreement specifies six annual payments of $430,000 beginning December 31, 2024, and on each December 31 thereafter through 2029. The six-year lease is equal to the estimated useful life of the equipment. the contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 2%. The CPI at the beginning of the lease is 100. Digium routinely leases equipment to other firms. the interest rate in these lease arrangements is 8%. Note: Use tables, Excel, or a financial calculator. (FVof $1, PV of $1, FVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2024.On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from Builders, Inc. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate Builders used to calculate lease payment amounts. Builders manufactured the equipment at a cost of $2.5 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 price at which Builders is "selling" the equipment (present value of the lease payments) at June 30, 2018. 2. What amounts related to the lease would Builders report in its balance sheet at December 31, 2018 (ignore taxes)? 3. What amounts related to the lease would Builders report in its income statement for the year ended December 31, 2018 (ignore taxes)? (For all…On June 30, 2018, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The leaseagreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year leaseterm, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the warehouse from Builders, Inc. at a cost of $3 million. Required:1. What amounts related to the lease would IC report in its balance sheet at December 31, 2018 (ignore taxes)?2. What amounts related to the lease would IC report in its income statement for the year ended December 31,2018 (ignore taxes)?