Instructions (a) Evaluate the criteria for classification and describe the nature of the lease for both Rauch and Donahue. (b) Prepare the lease amortization schedule(s) for Donahue for all 4 years of the lease. (c) Prepare the journal entries for Donahue for 2020 and 2021.
Q: Maggie's Resorts was wondering how to use capital budgeting to decide if their $7,943,000 expansion…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: : (Intangible Impairment) The following information is for a copyright owned by Lighting Designs…
A: Journal entries are made to record the transactions as the first process in the books of accounts…
Q: HWCH 24 Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a…
A: The profit margin is the ratio that shows the percentage of net income earned on each amount of…
Q: Babuca Corporation has provided the following production and total cost data for two levels of…
A: VARIABLE COST Variable Cost is a cost that varies with the level of output.variable costs include…
Q: Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products…
A: The activity-based costing is used for allocating the manufacturing overhead cost to products. The…
Q: At December 31, the records of Kozmetsky Corporation provided the following selected and incomplete…
A: The dividend is declared to the shareholders from the retained earnings of the business. The stock…
Q: a. How many pizzas must he sell each month to break even under these conditions?
A: "Since you posted a question with multiple sub-parts, we will solve the first three sub-parts for…
Q: North Country Wood Toys makes wooden toys for children of all ages. They use two departments:…
A: The production cost report under the weighted average method is prepared by ignoring the work done…
Q: to sel porting goods Determine the amount of start-up costs Jullette can immediately expense (not…
A: Startup costs : Startup costs are the expenses incurred during the process of creating a new…
Q: We Can Reach It produces ladders for household use. The company makes two types: step ladders and…
A: Variable costs are costs which changes along with change in sales activity level. Fixed costs do not…
Q: Sheridan Industries has the following patents on its December 31, 2024, balance sheet. Useful Life…
A: An intangible asset is a nonphysical asset such as a patent, copyright, or goodwill. The company…
Q: Academy Driving School reported the following amounts in its financial statements: Year 1…
A: The objective of the question is to calculate the Earnings Per Share (EPS) and Return on Equity…
Q: As an auditor, justify the following requirements:(a) List the principal procedures which the…
A: Inventory counts, also known as stock-takings, are critical elements of the auditing process,…
Q: Tri-County Social Service Agency is a not-for-profit organization in the Midwest. Use the following…
A: Cash Budget is that budget which helps every organisation to maintain a cash balance for day to…
Q: 1 Function: SUM; Formulas: Add; Multiply; Divide; Cell Referencing 2 3 E14.2a - Using Excel to…
A: Overhead allocation means the distribution of the overheads incurred to the relevant departments…
Q: Three different lease transactions are presented below for Crane Enterprises. Assume that all lease…
A: A lease is defined as a contractual agreement incorporated between two business entities where one…
Q: Exercise 8-3 (Algo) Direct Materials Budget [LO8-4] Two grams of musk oil are required for each…
A: A budget accounts for both anticipated income and expenses as well as future savings and spending.…
Q: Strand Corp lost its inventory in a fire, and they have asked you to calculate the value of Ending…
A: Answer:- Formulas:- Cost of Goods Sold = Beginning Inventory + Net Purchase – Ending InventoryCost…
Q: Nilson Inc. had accounting income of $156,000 in 2023. Included in the calculation of that amount is…
A: In order to get the actual income tax expenses the taxable income is required to be computed so that…
Q: The marketing department of Central Perk Coffees estimates the following monthly demand for…
A: Income statement is a financial statement that shows profitability, total revenue and total…
Q: The following information was taken from the records of Tinker Enterprises: Year 1 Year 2…
A: Cost of goods sold is the total value of goods sold during the year. It is calculated by reducing…
Q: Could you please explain why Depreciation Expenses for the year 2021 was calucated as $40,000 x…
A: Depreciation: It refers to an accounting policy that is used by the business to spread over the…
Q: Dierich Company uses an activity-based costing system with three activity cost pools. The company…
A: Activity-Based Costing is a more refined and detailed approach to costing than traditional methods…
Q: Please answer with reason for all why the option is correct and why the other options are…
A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Current Attempt in Progress Carla Vista Corporation has the following selected transactions during…
A: Journal entries are made to record the transactions as the first process in the books of accounts…
Q: Can you show working?
A: As per the Honor code of Bartleby we are bound to give the answer of the first three sub parts only,…
Q: a. Determine the amount of desired profit from the production and sale of 800 handbags. b. Determine…
A: Product cost refers to the sum of all expenses incurred in manufacturing a particular item. It…
Q: On december 31, 2015, Leslie Company held an investment in bonds of Kaufmann Company which it…
A: Security acquired with the intention of holding it until maturity is known as held-to-maturity. For…
Q: A 1 Chapter 13: Applying Excel 2 3 Data 4 Exhibit 13-5 Santa Maria Wool Cooperative 5 Cost of wool 6…
A: An incremental analysis or differential analysis is prepared to determine the financial advantages…
Q: Lindor Enterprises projects sales for the first three months of the year to be: $10,400 in January,…
A: Cash Budget is an estimation of the cash inflows and cash outflows for the future period for that…
Q: please solve it using weighted average method while showing T-accounts and every step. solve it…
A: Equivalent units An equivalent unit of production is an indication of the amount of work done by…
Q: At year-end, a storm surge damaged the warehouse of Beaver Company. The entire inventory and many…
A: Cost of goods sold is actual cost of goods that is being sold to the customers. It includes…
Q: Cypress Oil Company's December 31, 2021, balance sheet listed $727,000 of notes receivable and…
A: The notes receivable indicate the buyer's promise to return a certain amount owing to the seller…
Q: ration issued $500,000
A: Non current liabilites are those liabilites that are not due for atleast one year.Current liabilites…
Q: One subunit of Bacall Sports Manufacturing Company had the following financial results last month:…
A: Variance is the Difference between actual and budgeted values. If the actual expense is greater than…
Q: Prepare an adjusted trial balance. Cash Accounts Receivable Inventory Supplies Equipment Accumulated…
A: The adjusting entries are only required to be made only when there is some of the transactions which…
Q: Which of the following statements applies to the recognition of property, plant, and equipment…
A: The property plant and equipment are the long-term assets that help in generating revenues. The IAS…
Q: Elton earned $120,000 working as a recording engineer last year. The total amount of his…
A: A Registered Retirement Savings Plan (RRSP) is a Canadian tax-advantaged investment account designed…
Q: An anonymous source advised Canada Revenue Agency (CRA) that Jim Mayers, owner of Mayers Grocery…
A: Given the anonymous tip about potential fraudulent tax returns and the observation of decreasing…
Q: Steven has an RRSP contribution limit of $17,120 in 2022. In February he contributes $10,000 and…
A: Registered Retirement Savings Plan is also referred to as RRSP is a kind of government-registered…
Q: calculations. Debt-to-Equity Ratio. Gross Profit Margin. Operating Profit Margin. Net Profit Margin.…
A: The ratio analysis is a quantitative procedure of obtaining a look at a firm's functional…
Q: On March 1, 2022, Jaiku Industrial gave Light Co. a 180-day, 8%, $78,000 note payable to extend…
A: A note payable is a written promise to pay a sum of money on a specific date. It is a liability for…
Q: Compute gross profit earned by the company for each of the four costing methods. Note: Round your…
A: FIFO-First in First Out-Units purchased earlier sold firstLIFO-First in First Out-Units purchased…
Q: mith Brothers Pharmaceutical Company has $250,000 in excess cash and is considering two…
A: The ability to elect the board of directors and have a significant impact on corporate policies…
Q: Off-Balance Sheet Activities do not have a direct impact on the financial stability or risk of a FI.…
A: Off-Balance Sheet Activities are those assets and liabilites that do not appear on the balance…
Q: o. Dirksen depreciated the machinery using MACRS (seven-year recovery period). What are the amount…
A: Accumulated depreciation is the total amount of depreciation expense allocated to a particular asset…
Q: acturing costs for e
A: The manufacturing costs for each job is the sum of direct material, direct labour and applied…
Q: Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for…
A: Cash collection refers to the process of gathering payments owed by customers for products or…
Q: Sunland Products manufactures and sells a variety of camping products. Recently the company opened a…
A: Income statement is a financial statement that shows profitability, total revenue and total…
Q: On October 1, 2023 PT. Leci borrowed $500,000 from Pineapple Bank by signing a 10-month, 6% note. If…
A: The adjustment entries are prepared to adjust the revenue and expense of the current period. The…
7
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
- 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.Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement dated January 1, 2019, that provides for it to lease non-specialized heavy equipment from Scott Rental Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 4 years. The lease is noncancelable and requires annual rental payments of 20,000 to be paid in advance at the beginning of each year. 2. The cost, and also fair value, of the heavy equipment to Scott at the inception of the lease is 68,036.62. The equipment has an estimated life of 4 years and has a zero estimated residual value at the end of this time. 3. Adden agrees to pay all executory costs directly to a third party. 4. The lease contains no renewal or bargain purchase options. 5. Scotts interest rate implicit in the lease is 12%. Adden is aware of this rate, which is equal to its borrowing rate. 6. Adden uses the straight-line method to record depreciation on similar equipment. 7. Executory costs paid at the end of the year by Adden are: Required: 1. Next Level Determine what type of lease this is for Adden. 2. Prepare a table summarizing the lease payments and interest expense for Adden. 3. Prepare journal entries for Adden for 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.
- Lessee and Lessor Accounting Issues Diego Leasing Company agrees to provide La Jolla Company with equipment under a noncancelable lease for 5 years. The equipment has a 5-year life, cost Diego 25,000, and will have no residual value when the lease term ends. The fair value of the equipment is 30,000. La Jolla agrees to pay all executory costs (500 per year) throughout the lease period directly to a third party. On January 1, 2019, the equipment is delivered. Diego expects a 14% return on its net investment. The five equal annual rents are payable in advance starting January 1, 2019. Required: 1. Assuming this is a sales-type lease for the Diego and a finance lease for the La Jolla, prepare a table summarizing the lease and interest payments suitable for use by either party. 2. Next Level On the assumption that both companies adjust and close books each December 31, prepare journal entries relating to the lease for both companies through December 31, 2020, based on data derived in the table. Assume that La Jolla depreciates similar equipment by the straight line methodDetermining 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.Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides for it to lease equipment from Landau Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: The lease is noncancelable and has a term of 5 years. The annual rentals are 83,222.92, payable at the end of each year, and provide Landau with a 12% annual rate of return on its net investment. Timmer agrees to pay all executory costs directly to a third party on December 1 of each year. In 2019, these were insurance, 3,760; property taxes, 5,440. In 2020: insurance, 3,100; property taxes, 5,330. There is no renewal or bargain purchase option. Timmer estimates that the equipment has a fair value of 300,000, an economic life of 5 years, and a zero residual value. Timmers incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straightline method to record depreciation on similar equipment. Required: 1. Calculate the amount of the asset and liability of Timmer at the inception of the lease. (Round to the nearest dollar.) 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries on the books of Timmer for 2019 and 2020. 4. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the present value of next years payment approach to classify the finance lease obligation between current and noncurrent. 5. Next Level Prepare a partial balance sheet in regard to the lease for Timmer for December 31, 2019. Use the change in present value approach to classify the finance lease obligation between current and noncurrent.
- 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.Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
- 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).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.)On January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business. The following information relates to the lease: Lease term -10 years Useful life of the equipment - 12 years Annual rental payable in advance every January 1 - P240,000 Implicit interest rate - 14% Incremental borrowing rate - 12% Tiktok has the option to purchase the leased asset by paying P400,000, which approximates the fair value of the equipment on the option exercise date. (Round off the PV factor to four decimal places)What is the cost of the right-of-use asset?