On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $2,218,982. The lease agreement specifies six annual payments of $480,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year and (b) 3 percent. The CPI at the beginning of the lease is 150. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2018.
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- On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.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.On January 1, 2018, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cashselling price for the equipment is $1,306,578. The lease agreement specifies six annual payments of $300,000 beginning December 31, 2018, and at each December 31 thereafter through 2023. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higherof (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the leaseis 120. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 10%.Required:Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2018.
- On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium’s cash selling price for the equipment is $1,306,578. The lease agreement specifies six annual payments of $300,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the lease is 120. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 10%.Required:Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2021.On January 1, 2021, QuickStream Communications leased telephone equipment from Diglum, Inc. Digium's cash selling price for the equipment is $1,607604. The lease agreement specifies six annual payments of $380,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the lease is 110. Diglum routinely leases equipment to other firms. The interest rate in these lease arrangements is 11%. (EV OLS1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of 5) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2021 (If no entry is required for a transaction/event, select "No…On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's cash selling price for the equipment is $2,218,982. The lease agreement specifies six annual payments of $480,000 beginning December 31, 2021, and at each December 31 thereafter through 2026. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 3%. The CPI at the beginning of the lease is 150. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. ( EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2021. (If no entry is required for a transaction/event, select "No…
- On January 1, 2024, QuickStream Communications leased telephone equipment from Digium, Incorporated Digium’s cash selling price for the equipment is $1,618,008. The lease agreement specifies six annual payments of $350,000 beginning December 31, 2024, and on each December 31 thereafter through 2029. The six-year lease is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 2%. The CPI at the beginning of the lease is 140. Digium routinely leases equipment to other firms. The interest rate in these lease arrangements is 8%. Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to the nearest whole…On January 1, 2024, QuickStream Communications leased telephone equipmen for Digium, Incorporated Digium's cash selling price for the equipment is $1,987,838. The lease agreement specifies six annual payments of $430,000 beginning December 31, 2024, and on each December 31 thereafter through 2029. The six-year lease is equal to the estimated useful life of the equipment. the contract specifies that lease payments for each year will increase by the higher of (a) the increase in the Consumer Price Index for the preceding year or (b) 2%. The CPI at the beginning of the lease is 100. Digium routinely leases equipment to other firms. the interest rate in these lease arrangements is 8%. Note: Use tables, Excel, or a financial calculator. (FVof $1, PV of $1, FVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the appropriate journal entries for QuickStream to record the lease at its beginning date of January 1, 2024.On January 1, 2021, The Madrid Telephone Co. leased diagnostic equipment from Carlota Corp. The lease agreement specifies eight annual payments of $85,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2027. The eight-year lease term ending December 31, 2028 (a year after the final payment), is equal to the estimated useful life of the equipment. The contract specifies that lease payments for each year will increase on the basis of the increase in the Consumer Price Index (CPI) for the year just ended. Thus, the first payment will be $85,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 110. Carlota Corp. routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 5%. Required: 1. Prepare the appropriate journal entries for The Madrid Telephone Co. to record the lease at its beginning. 2. Assuming the CPI is 113 at that…
- On June 30, 2024, Georgia-Atlantic, Incorporated, 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 on June 30, 2024. 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. 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. Determine the present value of the lease payments on June 30, 2024 that Georgia-Atlantic uses to record the right-of-use asset and lease liability. 2. What amount related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2024 (ignore taxes)? 3. What amount related to the lease would…On June 30, 2021, Hercule, Inc. leased warehouse equipment from Marble, Inc. The lease agreement calls for Hercule to make semiannual lease payments of $1,828,052 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Hercule's incremental borrowing rate is 6%, the same rate Marble used to calculate lease payment amounts. Marble manufactured the equipment at a cost of $9.5 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 price at which Marble is "selling" the equipment (present value of the lease payments) at June 30, 2021. 2. What amounts related to the lease would Marble report in its balance sheet at December 31, 2021? (Ignore taxes.) 3. What would be the net effect of the lease that Marble would report in its income statement for the year ended December 31, 2021? (Ignore taxes.) (For all requirements, round your…On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $604,355 over a five-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 $4.9 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…