Provide journal entries pertaining to this lease for Tartufo Corp. for the 20X5 year. Tartufo Corp. uses straight-line depreciation for similar assets, with a half-year of deprecation recorded in the year of acquisition.
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Tartufo Corp. entered into a 6-year lease agreement with Gelato Inc. to lease equipment beginning on January 1, 20X5. The IBR is 7% while the rate implicit in the lease is 6%. Tartufo Corp. is aware of the rate implicit in the lease.
Annual payments of $57,500 at the beginning of the year are required. The lease stipulates a $42,000 residual value guarantee but Tartufo Corp. expects a $12,000 payout will be required. Tartufo Corp. will return the equipment to Gelato Inc. at the end of the lease term. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)
Required:
Provide journal entries pertaining to this lease for Tartufo Corp. for the 20X5 year. Tartufo Corp. uses straight-line
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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).Sliver Limited leases an equipment from Tesco Limited under the following lease terms. The lease term is 4 years, non-cancelable and requires equal annual rental payments at the beginning of each calendar year starting 1 January 2021. Tesco Limited wants a guarantee that the residual value of the equipment at the end of the lease is at least $26,000. Sliver Limited agrees to guarantee a residual value of this amount though it expects the residual value of the equipment to be only $10,000 at the end of the lease term. The cost of an equipment is $230,000 and the fair value of the equipment is $350,000 on 1 January 2021. The equipment has an economic life of 5 years. Both companies depreciate all their equipment on a straight-line basis. Tesco Limited wants to earn a return of 6% on the lease and collectability of the payment is probable. Sliver Limited's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Required: (Round all amounts to the nearest dollar.)…Bridgeport Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $46,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Bridgeport’s incremental borrowing rate is 9%. Bridgeport is unaware of the rate being used by the lessor. At the end of the lease, Bridgeport has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Bridgeport uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Collapse question part(a)Prepare the journal entries, that Bridgeport should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…
- Whispering Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $54,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Whispering’s incremental borrowing rate is 8%. Whispering is unaware of the rate being used by the lessor. At the end of the lease, Whispering has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Whispering uses the straight-line method of depreciation on similar owned equipment.Waterway Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $46,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Waterway's incremental borrowing rate is 9%. Waterway is unaware of the rate being used by the lessor. At the end of the lease, Waterway has the option to buy the equipment for $5.000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Waterway uses the straight-line method of depreciation on similar owned equipment Prepare the journal entries, that Waterway should record on December 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manualy. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor…Sheffield Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $53,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Sheffield’s incremental borrowing rate is 9%. Sheffield is unaware of the rate being used by the lessor. At the end of the lease, Sheffield has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Sheffield uses the straight-line method of depreciation on similar owned equipment.
- Blue Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $57,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 7%; Blue’s incremental borrowing rate is 9%. Blue is unaware of the rate being used by the lessor. At the end of the lease, Blue has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blue uses the straight-line method of depreciation on similar owned equipment.Click here to view factor tables. (a) Prepare the journal entries, that Blue should record on December 31, 2020. (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 0 for the amounts.…Vaughn Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2020. Annual rental payments of $56,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 6%; Vaughn's incremental borrowing rate is 8%. Vaughn is unaware of the rate being used by the lessor. At the end of the lease, Vaughn has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Vaughn uses the straight-line method of depreciation on similar owned equipment. Prepare the journal entries, that Vaughn should record on December 31, 2022. (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. Round answers to O decimal places e.g.…Blossom Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $41,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Blossom's incremental borrowing rate is 6%. Blossom is unaware of the rate being used by the lessor. At the end of the lease, Blossom has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Blossom uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Prepare the journal entries, that Blossom should record on December 31, 2025. (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.…
- On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. 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, 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 $3 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…Crane, Inc. leased equipment from Tower Company under a 4-year lease requiring equal annual payments of $224152, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4- year useful life and no salvage value. If Crane, Inc.'s incremental borrowing rate is 11% and the rate implicit in the lease (which is known by Crane, Inc.) is 9%, what is the amount recorded for the leased asset at the lease inception? 9%, 4 periods 11%, 4 periods O $695420 O$791546 O $771914 O $726190 PV Annuity Due 3.53129 3.44371 PV Ordinary Annuity 3.23972 3.10245 Attempts: 0 of 1 used Submit AnswerPearl Steel Company, as lessee, signed a lease agreement for equipment for 5 years, beginning December 31, 2025. Annual rental payments of $51,000 are to be made at the beginning of each lease year (December 31). The interest rate used by the lessor in setting the payment schedule is 4%; Pearl's incremental borrowing rate is 6%. Pearl is unaware of the rate being used by the lessor. At the end of the lease, Pearl has the option to buy the equipment for $5,000, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Pearl uses the straight-line method of depreciation on similar owned equipment. Click here to view factor tables. Your answer is partially correct. Prepare the journal entries, that Pearl should record on December 31, 2025. (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 0…
