Teal Mountain Corporation recorded a right-of-use asset for $284,000 as a result of a finance lease on December 31, 2019. Teal Mountain's incremental borrowing rate is 13%, and the implicit rate of the lessor was not known at the commencement of the lease. Teal Mountain made the first lease payment of $52,373 on on December 31, 2019. The lease requires 8 annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Teal Mountain's December 31, 2020, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit December 31, 2020 (To record interest expense)

Teal Mountain Corporation recorded a right-of-use asset for $284,000 as a result of a finance lease on December 31, 2019. Teal Mountain's incremental borrowing rate is 13%, and the implicit rate of the lessor was not known at the commencement of the lease. Teal Mountain made the first lease payment of $52,373 on on December 31, 2019. The lease requires 8 annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Teal Mountain's December 31, 2020, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit December 31, 2020 (To record interest expense)

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 1P: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases...

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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.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
Determining Type of Lease and Subsequent Accounting On January 1, 2019, Ballieu Company leases specialty equipment with an economic life of 8 years to Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of 8 years. The annual rentals arc 35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. Anderson agrees to pay all executory costs directly to a third party and is given an option to buy the equipment for 1 at the end of the lease term, December 31, 2026. The cost of the equipment to the lessee is 150,000, and the fair value is approximately 185,100. Ballieu incurs no material initial direct costs. It is probable that Ballieu will collect the lease payments. Ballieu estimates that the fair value is expected to be significantly greater than 1 at the end of the lease term. Ballieu calculates that the present value on January 1, 2019, of 8 annual payments in advance of 35,000 discounted at 14% is 185,090.68 (the 1 purchase option is ignored as immaterial). Required: 1. Next Level Identify the classification of the lease transaction from Ballices point of view. Give the reasons for your classification. 2. Prepare all the journal entries tor Ballieu for the years 2019 and 2020. 3. Discuss the disclosure requirements for the lease transaction in Ballices notes to the financial statements.
Rick Kleckner Corporation recorded a right-of-use asset for $300,000 as a result of a finance lease on December 31, 2019. Kleckner's incremental borrowing rate is 8%, and the implicit rate of the lessor was not known at the commencement of the lease. Kleckner made the first lease payment of $48,337 on December 31, 2019. The lease requires eight annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Kleckner's December 31, 2020, entries.
Tamarisk Corporation recorded a right-of-use asset for $259,700 as a result of a finance lease on December 31, 2019. Tamarisk’s incremental borrowing rate is 11%, and the implicit rate of the lessor was not known at the commencement of the lease. Tamariskmade the first lease payment of $49,651 on on December 31, 2019. The lease requires 7 annual payments. The equipment has a useful life of 7 years with no residual value.Prepare Tamarisk's December 31, 2020, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit December 31, 2020 enter an account title to record interest expense enter a debit amount enter a credit amount enter an account title to record interest expense enter a debit amount enter a credit amount enter an account title to record interest expense enter a debit amount enter a credit…
Kingbird Corporation recorded a right-of-use asset for $289,600 as a result of a finance lease on December 31, 2019. Kingbird's incremental borrowing rate is 14%, and the implicit rate of the lessor was not known at the commencement of the lease. Kingbird made the first lease payment of $54,762 on on December 31, 2019. The lease requires 8 annual payments. The equipment has a useful life of 8 years with no residual value. Prepare Kingbird's December 31, 2020, entries. (Credit account titles are automatically Indented when amount Is entered. Do not Indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanatlon Debit Credit December 31, 2020 (To record interest expense) December 31, 2020 (To record amortization of the right-of-use asset)
Mando Co. leased a piece of nonspecialized equipment for use in its operations from Empire Leasing on January 1, 2019. The 5- year lease requires annual lease payments of $346, beginning on January 1, 2019. The lease qualifies as an operating lease for the lessee. Mando's incremental borrowing rate is 11%. Mando incurred initial direct costs of $37. What is the lease expense that Mando will record at the end of each year of the lease? (Round to the nearest whole dollar.)
Metlock Corporation recordeda right-of-use asset for $268,800 as a result of a finance lease on December 31, 2019. Metlock's incremental borrowing rate is 11%, and the implicit rate of the lessor was not known at the commencement of the lease. Metlock made the first lease payment of $51,390 on on December 31, 2019. The lease requires 7 annual payments. The equipment has a useful life of 7 years with no residual value. Prepare Metlock's December 31, 2020, entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit December 31, 2020 (To record interest expense) December 31, 2020 (To record amortization of the right-of-use asset)
Shamrock Corporation recorded a right-of-use asset for $187,600 as a result of a finance lease on December 31, 2019. Shamrock’s incremental borrowing rate is 12%, and the implicit rate of the lessor was not known at the commencement of the lease. Shamrock made the first lease payment of $36,702 on on December 31, 2019. The lease requires 7 annual payments. The equipment has a useful life of 7 years with no residual value.Prepare Shamrock's December 31, 2020, entries.
Eubank Company, a lessee, enters into a lease agreement on January 1, 2021, for equipment. The following data are relevant to the lease agreement: - The term of the noncancelable lease is 4 years. Payments of $978,446 are due on January 1 of each year. The first payment is January 2021. - The fair value of the equipment on January 1, 2021 is $3,500,000. The equipment has an economic life of 6 years with nosalvage value. - Eubank uses the straight-line method of depreciation. - Eubank’s implicit rate is 8%. - This will be treated as a finance lease (Lessee Perspective). Instructions: Prepare the journal entries on Eubank’s books (lessee) that relate to the lease agreement for the following dates, you do not need to create an amortization schedule. a. January 1, 2021. b. December 31, 2021.
Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. 2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has a residual value of $20,000 which is guaranteed by Davis Company (the lessee). 3. Davis agrees to pay all executory costs directly to a third party. 4. The interest rate implicit in the lease is 14%. 5. The initial direct costs are insignificant and assumed to be zero. 6. It is probable that Edom will collect the lease payments. Required: 1. Next Level Assuming that the lease is a sales-type lease, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income earned by…