On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement that qualifies as an operating lease to Waldo. The present value of the end-of-year lease payments of $151,526 discounted at 8% is $605,000. The expected economic life of the asset is seven years. The lease term is five years. What would Waldo record as amortization in 2021?

On January 1, 2021, PokemonGo Company leased equipment to Waldo Corporation under a lease agreement that qualifies as an operating lease to Waldo. The present value of the end-of-year lease payments of $151,526 discounted at 8% is $605,000. The expected economic life of the asset is seven years. The lease term is five years. What would Waldo record as amortization in 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
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Sarasota Corporation entered into a lease agreement on January 1, 2020, to provide Ivanhoe Company with a piece of machinery. The terms of the lease agreement were as follows. 1. The lease is to be for 3 years with rental payments of $9,066 to be made at the beginning of each year. 2. The machinery has a fair value of $61,000, a book value of $46,800, an end-of-life salvage value of $0, and an economic life of 8 years. 3. At the end of the lease term, both parties expect the machinery to have a residual value of $39,200, none of which is guaranteed. 4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. 5. The implicit rate is 6%, which is known by Ivanhoe. 6. Collectibility of the payments is probable. 7. Assume that the lessor uses straight-line depreciation. (a) Evaluate the criteria for classification of the lease, and describe the nature of the…