On January 1, 2018, Claude paid the annual rental for 2018 and 2019 including the security deposit (non-refundable). In addition to annual rental and real property taxes, part of the lease was for Claude to improve the facility. The improvement was completed on January 1, 2020. Details of the improvements were as follows: Cost of leasehold improvement - 6,000,000 Estimated useful life of improvement - 15 years
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- 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.PROBLEM NO. 3 Assume that DBP Leasing Corp. and Minasugbo Inc. sign a lease contract effective on January 1, 2019 where DBP Leasing leases to Minasugbo a bulldozer. The terms and provisions of the lease contract and other pertinent date are as follows: • The term of the lease is five years. The lease agreement is non-cancelable, requiring equal rental payments of P20,711.11 at the beginning of each year (annuity-due basis). The bulldozer has a fair value at the commencement of the lease of P100,000, an estimated economic life of five years, and a guaranteed residual value of P5,000. (Minasugbo expects that it is probable that the expected value of the residual value at the end of the lease will be greater than the guaranteed amount of P5,000.) The lease contains no renewal options. The bulldozer reverts to DBP Leasing at the termination of the lease. Minasugbo's incremental borrowing rate is 5 percent per year. • Minasugbo depreciates its equipment on a straight-line basis. DBP Leasing…Claude leased a facility from ML partnership in January 1, 2018. Terms of the lease were as follows: Annual rental Annual real property tax assumed and paid by Claude 50,000 Security deposit 300,000 200,000| Lease term 12 years On January 1, 2018, Claude paid the annual rental for 2018 and 2019 including the security deposit (non-refundable). In addition to annual rental and real property taxes, part of the lease was for Claude to improve the facility. The improvement was completed on January 1, 2020. Details of the improvements were as follows: Cost of leasehold improvement - 6,000,000 Estimated useful life of improvement - 15 years Determine the income to be reported by ML partnership in 2018 and 2019, respectively. 600,000; 50,000 650,000; 0 850,000; 50,000 350,000; 350,000
- On June 1, 2021 Maroon Company entered into a 5-year nonrenewable lease, commencing on that date, for office space and made the following collections from the lessee: • Bonus to obtain lease, P300,000 First month's rent, P100,000 • Last month's rent, P100,000 In its income statement for the year ended June 30, 2021, what amount should Maroon report as rent income?On 1 July 2019, True Ltd leased a plastic-moulding machine from Grit Ltd. The machine cost Grit Ltd $130 000 to manufacture and had a fair value of $154 109 on 1 July 2019. The lease agreement contained the following provisions.Lease term 4 YearsAnnual rental payment in advance on 1July each year $40,000Residual value at end of lease term $15,000Residual guaranteed by lessee nilInterest rate implicit in lease 8%The lease is cancellable only with the permission of the lessorThe expected useful life of the machine is 6 years. True Ltd intends to return the machine to the Grit Ltd at the end of the lease term..Required1. Prepare the lease payments schedule for the True Ltd (show all workings).2. Prepare the journal entries in the books of True Ltd for the year ended 30 June 2020 and 30 June 2021.19 On September 30, 2024, Truckee Garbage leased equipment from a supplier and agreed to pay $125,000 annually for 15 years beginning September 30, 2025. Generally accepted accounting principles require that a liability be recorded for this lease agreement for the present value of scheduled payments. Accordingly, at inception of the lease, Truckee recorded a $1,214,031 lease liability. Determine the interest rate implicit in the lease agreement. 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)
- Claude leased a facility from ML partnership in January 1, 2018. Terms of the lease were as follows: Annual rental 300,000 Annual real property tax 50,000 assumed and paid by Claude Security deposit 200,000 Lease term 12 years On January 1, 2018, Claude paid the annual rental for 2018 and 2019 including the security deposit (non-refundable). In addition to annual rental and real property taxes, part of the lease was for Claude to improve the facility. The improvement was completed on January 1, 2020. Details of the improvements were as follows: Cost of leasehold improvement - 6,000,000 Estimated useful life of improvement - 15 years Determine the income to be reported by ML partnership in 2020 assuming the company opted to report income from improvement using the spread-out method.JJF enters into the lease of a piece of machinery for P1,000 per annum for 5 years on Jul 1, 2022. JJF is granted a rent-free period in the first year and elects to apply the low-value exemption in IFRS 16. Calculated the annual rental expense to be recognized through profit or loss for the year ended December 31, 2022. a. 800 B. 500 C. 400 D. Nil11. As an inducement to enter a lease, Aris Company, a lessor, grants Hompson Company, a lessee, 9 months of free rent under a five-year operating lease. The lease is effective on July 1, 2018 and provides for monthly rental of P100,000 to begin April 1, 2019. In Hompson’s income statement for the year ended June 30, 2019 rent expense should be reported at A. P 300,000 B. P 1,020,000 C. P 255,000 D, P 900,000
- On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. What total amount of finance income will Entity Y recognize over the lease term?The lessor and the lessee entered into a lease agreement on 1 January 2019. On that date, the lease liability recorded by the lessee was OMR 40,000. The interest rate is 10%. The amount of interest expense to be recognized on 31 December 2019 is: a. OMR 400 b. Amount can't be determined c. OMR 4,000 d. OMR 40,0001. Refer to Item 4. At what amount should the lease liability be recognized at January 1, 2022, after making the first payment of P260,000 to the lessor? 2. Assuming that the residual value of the two automobiles amounted to P150,000 at the end of the lease term, prepare the journal entry to record the transfer of the leased automobiles to the lessor.