On June 1, 2024, Emmet Property Management entered into a 2-year contract to oversee leasing and maintenance for an apartment building. The contract starts on July 1, 2024. Under the terms of the contract, Emmet will be paid a fixed fee of $66,000 per year and will receive an additional 10% of the fixed fee at the end of each year provided that building occupancy exceeds 80 %, Emmet estimates a 20% chance it will exceed the occupancy threshold, and concludes the revenue recognition over time is appropriate for this contract. Assume Emmet estimates variable consideration as the most likely amount. How much revenue should Emmet recognize on this contract in 2024? Multiple Choice $33,000 $66,000 $33,660 $36,750
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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.On October 1, 2019, Grahams WeedFeed Inc. signs a contract to maintain the grounds for BigData Corp. The contract ends on March 31, 2020, and has a monthly payment of 3,200. The contract does not include any stipulations for additional periods. On June 1, Grahams WeedFeed and BigData sign a new 12-month contract that is retroactive to April 1, 2020. The monthly fee for the new contract is 4,000 per month and is also retroactive to April 1, 2020. During April and May of 2020, while the new contract was being negotiated, Grahams Weed Feed continued to maintain the grounds, and BigData continued to pay 3,200 per month. BigData was satisfied with Grahams WeedFeeds performance, and the only issue during negotiations was the monthly fee. Required: Determine if a valid contract exists between Grahams WeedFeed and BigData during April and May 2020.Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required(Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing Company. c)…
- Communication S.A. signed a contract with Satellite Leasing Corporation at 1st January 2019 to lease a machine. The agreement consists in nine equal annual payments of $18,000 at the beginning of each year with an interest rate of 5%. The yearly rental payment includes $3,000 of executory costs related to taxes on the machine. There is an option to purchase the machine at the end of the lease term for $5,000. The machine has an estimated useful life of 10 years, no residual value and uses straight line depreciation method. Consider a PVIF (n=9, i=5%) of 0.6446 and PVIFA (n=9, i=5%) of 7.1078. The accounting balance day for Communication S.A. is 31 of December. Required a) Calculate the present value of the minimum lease payment. b) Prepare the journal entries for the lessee to reflect the signing of the lease agreement, payment and expenses for the year 2019. c) Prepare the journal entries for the lessor to reflect the signing of the lease agreement, payment and revenues for…Communication S.A. signed a contract with Satellite Leasing Corporation at 1st January 2019 to lease a machine. The agreement consists in nine equal annual payments of $18,000 at the beginning of each year with an interest rate of 5%. The yearly rental payment includes $3,000 of executory costs related to taxes on the machine. There is an option to purchase the machine at the end of the lease term for $5,000. The machine has an estimated useful life of 10 years, no residual value and uses straight line depreciation method. Consider a PVIF (n=9, i=5%) of 0.6446 and PVIFA (n=9, i=5%) of 7.1078. The accounting balance day for Communication S.A. is 31 of December. Required a) Calculate the present value of the minimum lease paymentOn January 1, 2021, Worcester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased the equipment from Wellesley Harvester at a cost of $958,158. Worcester's borrowing rate for similar transactions is 10%.The lease agreement specified four annual payments of $200,000 beginning January 1, 2021, the beginning of the lease, and on each December 31 thereafter through 2023. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $697,370.On January 1, 2023 (after two years and three payments), Worcester and Newton agreed to extend the lease term by two years. The market rate of interest at that time was 9%. (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. Prepare the appropriate entries for Worcester Construction on January 1, 2023, to adjust its lease liability for the lease…
- Sheridan Company, a machinery dealer, leased a machine to Sunland Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $31,448 at the beginning of each year. The first payment is received on January 1, 2025. Sheridan had purchased the machine during 2024 for $116,000. Collectibility of lease payments by Sheridan is probable. Sheridan set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sheridan at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $Telor, a private company that follows ASPE, entered into a lease agreement with Global Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Telor signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Global Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Telor does not know the implicit rate of the lease; Telor's incremental borrowing rate is 10%. Telor uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Telor. Round amounts to the nearest dollar.Sandhill Company, a machinery dealer, leased a machine to Wildhorse Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $30,232 at the beginning of each year. The first payment is received on January 1, 2025. Sandhill had purchased the machine during 2024 for $105,000. Collectibility of lease payments by Sandhill is probable. Sandhill set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Sandhill at the termination of the lease. Click here to view factor tables. (a) Compute the amount of the lease receivable. (for calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to O decimal places e.g. 5,275.) Amount of the lease receivable eTextbook and Media List of Accounts
- On January 1, 2021, Wetick Optometrists leased diagnostic equipment from Southern Corp., which had purchased the equipment at a cost of $1,437,237. The lease agreement specifies six annual payments of $300,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2025. The six-year lease term ending December 31, 2026 (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 for the year just ended. Thus, the first payment will be $300,000, and the second and subsequent payments might be different. The CPI at the beginning of the lease is 120. Southern routinely acquires diagnostic equipment for lease to other firms. The interest rate in these financing arrangements is 10%.Required:1. Prepare the appropriate journal entries for Wetick and Southern to record the lease at its beginning.2.…On December 31, 2021, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $40,000 for the truck. Its retail value is $98,099.The lease agreement specified annual payments of $26,000 beginning December 31, 2021, the beginning of the lease, and at each December 31 through 2024. Branch Motors’ interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2025) the truck was expected to be worth $16,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line amortization or depreciation.Yard Art guaranteed a residual value of $6,000. Yard Art’s incremental borrowing rate is 10% and is unaware of Branch’s implicit rate.A $1,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expedient, Branch Motors agreed to pay this fee. It is, however, reflected in the $26,000 lease payments.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of…Blossom Company, a machinery dealer, leased a machine to Crane Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $22,300 at the beginning of each year. The first payment is received on January 1, 2025. Blossom had purchased the machine during 2024 for $140,000. Collectibility of lease payments by Blossom is probable. Blossom set the annual rental to ensure a 4% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Blossom at the termination of the lease. Assume that Crane Corporation does not know the rate implicit in the lease used by Blossom, and Crane's incremental borrowing rate is 6%. In addition, assume that Crane incurs initial direct costs of $10,000. Click here to view factor tables. (a) x Your answer is incorrect. Compute the amount of the lease liability and right-of-use asset for Crane. (For calculation purposes, use 5 decimal places as displayed in the factor table provided…