Three different lease transactions are presented below for Carla Vista Enterprises. Assume that all lease transactions start on January 1, 2021. Carla Vista does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid on January 1 starting on January 1, 2021. Carla Vista Enterprises prepares its financial statements using ASPE. Manufacturing Equipment Office Vehicles Equipment Lease term 5 years 6 years 3 years Estimated economiç life 15 years 7 years 6 years Yearly rental payment $15,370 $15,348 $3,928 Fair market value of leased asset $99,050 $89,150 $16,910 Present value of lease rental payments $58,910 $69,023 $10,340
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- 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).Use the information in RE20-1. Prepare the journal entry that Keller Corporation would make during the first year of the lease assuming that the lease is classified as an operating lease.
- 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.Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment entered into on March 1, 2019. The lease is classified as a sales-type lease by the lessor (Anson Company) and as a finance lease by the lessee (Bullard Company). Assume that the lease payments are nude at the beginning of each month, interest and straight-line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a 3-year life. Required: 1. Record the lease (including the initial receipt of 2,000) and the receipt of the second and third installments of 2,000 in Ansons accounts. Carry computations to the nearest dollar. 2. Record the lease (including the initial payment of 2,000), the payment of the second and third installments of 2,000, and monthly depreciation in Bullards accounts. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.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.
- Three different lease transactions are presented below for Sunland Enterprises. Assume that all lease transactions start on January 1, 2024. Sunland does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid at the beginning of each year. Sunland Enterprises prepares its financial statements using ASPE Lease term Estimated economic life Yearly rental payment Fair market value of leased asset Present value of lease rental payments Interest rate Date Account Titles Manufacturing Equipment 5 years 15 years $17,400 $121,800 (To record interest payment) Texthonk and Media $78.564 3.5% (To record depreciation expense) Office Equipment 6 years 3 years 7 years 6 years $18,600 $4,860 $105,600 $21,750 $12.522 Assume that Sunland Enterprises has purchased the vehicle for $105.600 instead of leasing it and that the amount borrowed was $105,600 at 8% Interest, with interest payable at the end of each year, Prepare the…Three different lease transactions are presented below for Blossom Enterprises. Assume that all lease transactions start on January 1, 2024. Blossom does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid at the beginning of each year. Blossom Enterprises prepares its financial statements using ASPE. Lease term Estimated economic life Yearly rental payment Fair market value of leased asset Present value of lease rental payments Interest rate Date Jan. 1 Dec. 31 v Jan. 1 Account Titles Assume that Blossom Enterprises has purchased the vehicle for $72,600 instead of leasing it and that the amount borrowed was $72,600 at 8% interest, with interest payable at the end of each year. Prepare the entries for 2024. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…Three different lease transactions are presented below for Cullumber Enterprises. Assume that all lease transactions start on January 1, 2024. Cull umber does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid at the beginning of each year. Cullumber Enterprises prepares its financial statements using ASPE. Assume that Cullumber Enterprises has purchased the vehicle for $96, 600 instead of leasing it and that the amount borrowed was $96,600 at 8% interest, with interest payable at the end of each year. Prepare the entries for 2024. /List a/l debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. ff na entry is required, select "No Entry for the account titles and enter O for the amounts_ Record entries in the order displayed in the problem statement)
- Three different lease transactions are presented below for Crane Enterprises. Assume that all lease transactions start on January 1, 2024. Crane does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid at the beginning of each year. Crane Enterprises prepares its financial statements using ASPE. Lease termi Estimated economic life Yearly rental payment Fair market value of leased asset Present value of lease rental payments Interest rate Manufacturing Equipment 5 years 15 years $12,300 $86,400 $57,479 3.5% Vehicles 6 years 7 years $13,140 $75,000 $71,637 Office Equipment 3 years 6 years $3,420 $15,450 $9,519 8%Three different lease transactions are presented below for Pharoah Enterprises. Assume that all lease transactions start on January 1, 2024. Pharoah does not receive title to the properties, either during the lease term or at the end of it. The yearly rental for each of the leases is paid at the beginning of each year. Pharoah Enterprises prepares its financial statements using ASPE. Lease term Estimated economic life Yearly rental payment Fair market value of leased asset Present value of lease rental payments Interest rate Manufacturing Equipment 5 years 15 years $16,800 $117,600 $75,852 3.5% Office Equipment 6 years 3 years 7 years 6 years $18,000 $4,680 $102,000 $21,000 $94,356 $12,060 Vehicles 4% 8% Assume that Pharoah Enterprises has purchased the vehicle for $102,000 instead of leasing it and that the amount borrowed was $102,000 at 8% interest, with interest payable at the end of each year. Prepare the entries for 2024. (List all debit entries before credit entries. Credit…Use the information pertaining to Laura Leasing Company and Plote Company from E21.15. Assume that the expected residual value at the end of the lease is $10,000, such that the payments are $24,638.87. Instructions Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. In E21.15 Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $80,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. 4. The agreement requires equal annual…