Exercise 15-17 (Algo) Lessee and lessor; operating lease LO15-4 On January 12024, Nath - Langstrom Services Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasingwhich routinely finances equipment for other firms at an annual interest rate of 4% The contract calls for four rent payments of $15,000 each payable semiannually on June 30 and December 31 each year The computers were acquired by ComputerWorld at a cost of $100,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually Note: Use tables Excel, or a financial calculator (FV of 1PV of 1FVA of PVA of 1EVAD of $1 and PVAD of 1) Required: Prepare appropriate journal entries recorded by Nath - Langstrom Services for the first year of the lease Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease

Exercise 15-17 (Algo) Lessee and lessor; operating lease LO15-4 On January 12024, Nath - Langstrom Services Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasingwhich routinely finances equipment for other firms at an annual interest rate of 4% The contract calls for four rent payments of $15,000 each payable semiannually on June 30 and December 31 each year The computers were acquired by ComputerWorld at a cost of $100,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually Note: Use tables Excel, or a financial calculator (FV of 1PV of 1FVA of PVA of 1EVAD of $1 and PVAD of 1) Required: Prepare appropriate journal entries recorded by Nath - Langstrom Services for the first year of the lease Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.5AP

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Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. . The contract calls for four rent payments of $20,000 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $110,000 and were expected to have a useful life of eight years with no residual value. . Both firms record amortization and depreciation semiannually. 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. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first…
7 Company A (lessee) has reached a lease agreement with Company B (lessor) to lease a new carpet weaving machine for five years beginning January 1, Year 1. The present value of the weaving machine is $47,945 18 The following amortization schedule was developed using the lease agreement COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease C Date January 1, Year 1 January 1, Year 1 $10,355.57 January 1, Year 2 10,355.57 January 1, Year 3 10,355.57 January 1, Year 4 10,355.57 January 1, Year 5 10,355.57 January 1, Year 6 2,500.00 Payment Interest Reduction of Lease Liability $10,355.57 $0.00 1,585.78 8,769.79 1,234.99 9,120.58 870.16 9,485.40 490.75 9,864.82 96.15 2,403.85 $54,277.83 $4,277.83 $50,000.00 Lease Liability O Debit Inventory for $2,403; Credit Lease Receivable for $2,403 Debit Lease Receivable for $2,403; Credit Inventory for $2,403 O Debit Inventory for $2,500; Credit Lease Receivable for $2,500 O Debit Lease Receivable for $2,500; Credit Inventory for…
Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $18,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $106,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. 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) Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2) Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of…
Requirement: Provide the journal entries on Jan. 1, 20x1, Jan. 1, 20x3 5. On January 1, 20x3, Foggy Co. subleases the building to Creek Case 2: Sublease as an Operating lease On January 1, 20x1, Foggy Co. enters into a 10-year lease of a Sublease Fact pattern: machine from Bamboo, Inc. The annual·rent is P200,000 payable at the beginning of each year. The building has a remaining useful life of 25 years. The interest rate implicit in the lease is 10%. Case 1: Sublease as a Finance lease 4. On January 1, 20x3, Foggy Co. subleases the building to Creek Co. for 8 years at an annual rent of P208,000 payable at the beginning of each year. The first payment is due on January 1, 20x3. The interest rate implicit in the sublease is 9%. urement: Provide the journal entries on Jan. 1, 20x1, Jan. 1, 20x3 and Dec. 31, 20x3. Case 2: Sublease as an Operating lease beginning of each year. 31, 20x3.
nonrenewable lease, commencing on that date, for office space d. 45,000 7. On June 1, 20x0, Oren Co. entered into a nonrenewable lease, commencing on that date, for office and made the following payments to Cant Properties: (AICPA) five-year space 30,000 Bonus to obtain lease 10,000 First month's rent 10,000 Last month's rent In its income statement for the year ended June 30, 20x0, what amount should Oren report as rent expense? а. 10,000 (AICPA) b. 10,500 с. 40,000 d. 50,000
Direct Finance Lease – Lessor (PAS 17 and PFRS 16)Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details:Cost of Machinery P3,760,100Residual value – guaranteed 400,000Useful life and lease term 4 yearsImplicit interest rate 10%Annual rental is payable in advance on January 1Required: Based on the result of your audit, determine the following:____________1. Annual Rental____________2. Gross Receivable or Investment____________3. Unearned Interest____________4. Interest Income on 2011____________5. Carrying Value of Lease Receivable on January 1,2012
Problem 3: ABC Co. leased a new machine from XXX Inc. on January 1, 20X1, under a lease with the following information: Lease term 10 years Annual rent payable at the end of each year P 80,000 Useful life of the machine 12 years Implicit interest rate 14% Lessee’s incremental borrowing rate 12% The annual rental payment includes P 6,000 to cover maintenance costs. The maintenance costs transfer services to ABC. The amount charged reflects the stand alone selling price of the maintenance services. Requirements: Provide the entries in 20X1 and 20X2. Determine the current and non-current portions of the lease liability on December 31, 20X1.
Problem 2 On January 1, 20X1, ABC Co. enters into a 4 year lease of office equipment. Annual rental payable at the end of each year is P 12,000. As inducement in entering into the lease, the lessor makes the first 3 months of the lease as rent-free. ABC Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets. Provide journal entries.
Direct Finance Lease - Lessor (PAS 17 and PFRS 16) Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details: Cost of Machinery Residual value – guaranteed Useful life and lease term P3,760,100 400,000 4 years 10% Implicit interest rate Annual rental is payable in advance on January 1 Required: Based on the result of your audit, determine the following: 1. Annual Rental 2. Gross Receivable or Investment 3. Unearned Interest 4. Interest Income on 2011 5. Carrying Value of Lease Receivable on January 1,2012
Problem 5. Operating Lease- Lessor On January 1, 2 0x1, Lessor entered into operating lease. an Information followS: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to Cover for costs of administrative tasks is to be paid for any excess of sales of Lessee over P1,000,000. Lessee's sales for 20x1 are P1, 100, 000. Additional rent of 10% The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual depreciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.
Problem 5. Operating Lease- Lessor On January 1, 20x1, Lessor entered into an operating lease. Information follows: Annual Rent payable at the end of each year P100,000 Lease bonus paid by lessee to lessor 20,000 Security deposit paid by the lessee to the lessor 15,000 Lease term 5 years Additional Information: Annual rent рayment includes P5,000 to cover for Costs of administrative tasks Additional rent of 10% is to be paid for any excess of sales of Lessee over P1,000, 000. Lessee's sales for 20x1 are P1, 100, 000. The security deposit will be returned to Lessee at the end of lease term. The appropriate discount rate is 12% Annual de preciation on the leased asset is P70,000 Other costs related to the earning of lease income are P5,000 Requirements: Compute for the profit earned on the lease transaction in 20x1.
Problem 10-30 (IFRS)At the beginning of current year, Southstar Company leased a building withthe following information:Annual fixed payment in advance at the beginning of each lease year1, 000, 000Initial direct cost paid350, 000Least incentive received150, 000Lease bonus paid to lessor before commencement of lease100, 000Discounted amount of restoring the building as required by contract200, 000Purchase option that is not reasonably certain to be exercised300, 000Lease term 5 yearsUseful life of building 8 yearsImplicit interest rate 8%Present value of an annuity of 1 in advance at 8% for 5 periods 4.31Present value of 1 at 8% for 5 periods .68 1. What is the initial lease liability?a. 4, 514, 000b. 4, 310, 000c. 4, 614, 000d. 4, 764, 0002. What is the cost of right of use asset?a. 4, 814, 000b. 4, 810, 000c. 4, 710, 000d. 4, 610, 000