At the end of the December 31 2016 fiscal year, Yin trucking corporation which follows IFRS...

At the end of the December 31 2016 fiscal year, Yin trucking corporation which follows IFRS 16, negotiated and closed a long term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company’s specifications on land owned by the company. On January 1 2017, Yin trucking corporation took possession of the leased properties and made a cash payment of 1,048,00$. Although the useful life of each terminal is 40 years, the non cancellable lease runs for 20 years from January 1 2017 with a purchase option available upon expiration of the lease. The 20 year lease is effective for the period January 1 2017 through December 31 2036. Advance rental payments of 900,000$ are payable to the lessor on January 1 of each first 10 years of the lease term. Advance rental payments of 320,000$ are due on January 1 of each first 10 years of the lease term.The company has an option of purchasing all of these leased facilities for 1 million on December 31 2036 although their fair value at that time is to be estimated at 3 million$. At the end of the 40 years, the terminals and the facilities will have no remaining value. Yin trucking must also make annual payments on January 1 of each year to the lessor of 125,000$ for property taxes and 23,00$ for insurance. The lease was negotiated at 6% rate of return.

Required:

1) assuming a capitalized value of terminal facilities at January 1 2017 of 8.7 million, prepare the journal entries for YIN TRUCKING CORPORATION.

a) The signing of the lease

b) the cash payment to the lessor on January 1 2017

c) Depreciation of the cost of the properties for 2017 using the straight line method

d) The accrual of interest expense at December 31 2017 and any other adjusting journal entries

Solutions

Expert Solution

b)
YIN TRUCKING CORPORATION
Journal Entries
a) The signing of the lease	No journal entry

b) the cash payment to the lessor on January 1 2017
Lease Obligation	$ 9,00,000.00
Property Taxes Expense	$ 1,25,000.00
Property Insurance Expense	$ 23,000.00
Cash		$ 10,48,000.00

Partial Amortization Schedule
(Annuity Due Basis)
Date	Lease Payment	Executory Cost	Interest at 6%	Principal Reduction	Principal Balance
Jan 1 2017					$ 87,00,000.00
Jan 1 2017	$ 10,48,000.00	$ 1,48,000.00	$ -	$ 9,00,000.00	$ 78,00,000.00
Jan 1 2018	$ 10,48,000.00	$ 1,48,000.00	$ 4,68,000.00	$ 4,32,000.00	$ 73,68,000.00
Jan 1 2019	$ 10,48,000.00	$ 1,48,000.00	$ 4,42,080.00	$ 4,57,920.00	$ 69,10,080.00
Jan 1 2020	$ 10,48,000.00	$ 1,48,000.00	$ 4,14,604.80	$ 4,85,395.20	$ 64,24,684.80

c) Depreciation of the cost of the properties for 2017 using the straight line method
Depreciation Expense—Leased Assets ($8,700,000 ÷ 40)	$ 2,17,500.00
Accumulated Depreciation—Leased Assets		$ 2,17,500.00

d)The accrual of interest expense at December 31 2017 and any other adjusting journal entries
Interest Expense	$ 4,68,000.00
Interest Payable		$ 4,68,000.00

ekkarill92 answered 4 months ago

Next > < Previous

Related Solutions

Sheridan Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16,...

Sheridan Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2020, to lease equipment to Irvine Limited. The following information relates to the agreement. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment has an estimated economic life of eight years. 2. The asset’s cost to Sheridan, the lessor, is $309,000. The asset’s fair value at January 1, 2020, is $309,000....

Carla Vista Company has a December 31 fiscal year end. Selected information follows for Carla Vista...

Carla Vista Company has a December 31 fiscal year end. Selected information follows for Carla Vista Company for two independent situations as at December 31, 2021: 1. Carla Vista purchased a patent from Tamarisk Inc. for $411,000 on January 1, 2018. The patent expires on January 1, 2026. Carla Vista has been amortizing it over its legal life. During 2021, Carla Vista determined that the patent’s economic benefits would not last longer than six years from the date of acquisition....

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation:...

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation: Cash and cash equivalents $ 5,300 Accounts receivable (net) 23,000 Inventory 63,000 Property, plant, and equipment (net) 135,000 Accounts payable 42,000 Salaries payable 14,000 Paid-in capital 115,000 The only asset not listed is short-term investments. The only liabilities not listed are $33,000 notes payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is...

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation:...

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation: Cash and cash equivalents $ 6,800 Accounts receivable (net) 38,000 Inventory 78,000 Property, plant, and equipment (net) 210,000 Accounts payable 57,000 Salaries payable 18,000 Paid-in capital 190,000 The only asset not listed is short-term investments. The only liabilities not listed are $48,000 notes payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is...

West Wing Distribution Corporation has a fiscal year end of December 31. On March 15, 2017,...

West Wing Distribution Corporation has a fiscal year end of December 31. On March 15, 2017, the company’s 2016 financial statements were issued. Between December 31, 2016 and March 15, 2017, the following occurred: 1. On January 22, 2017, the company negotiated a major merger with Blakedon Industries to be completed by the middle of 2017. 2. On February 3, 2017, West Wing negotiated a $10 million long-term note (material amount) with the Credit Bank of Pennsylvania. 3. A flood...

Pearl Corporation is a publicly traded company that follows IFRS. On December 31, 2019, Pearl’ financial...

Pearl Corporation is a publicly traded company that follows IFRS. On December 31, 2019, Pearl’ financial records indicated the following information related to the company’s defined benefit pension plan: Defined Benefit Obligation $3,714,000 Pension Plan Assets 3,714,000 On July 1, 2020, Pearl acquired the operations of Trap Ltd. As one of the conditions of the purchase, Pearl agreed that Trap’s employees would be included in Pearl’s defined benefit pension plan, and would be granted credit for the past service of...

Valley Company’s adjusted trial balance on August 31, 2016, its fiscal year-end, follows. Debit Credit Merchandise...

Valley Company’s adjusted trial balance on August 31, 2016, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 37,000 Other (noninventory) assets 148,000 Total liabilities $ 42,735 Common stock 49,806 Retained earnings 72,788 Dividends 8,000 Sales 253,080 Sales discounts 3,872 Sales returns and allowances 16,703 Cost of goods sold 98,034 Sales salaries expense 34,672 Rent expense—Selling space 11,895 Store supplies expense 3,037 Advertising expense 21,512 Office salaries expense 31,635 Rent expense—Office space 3,037 Office supplies expense 1,012 Totals $ 418,409...

The adjusted trial balance of Pacific Scientific Corporation on December 31, 2016, the end of the...

The adjusted trial balance of Pacific Scientific Corporation on December 31, 2016, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,150; cost of goods sold, $1,340; selling expenses, $165; general and administrative expenses, $155; interest expense, $30; and gain on sale of investments, $70. Income tax expense has not yet been accrued. The income tax rate is 30%. Assume the company’s accountant prepared a multiple-step income statement. a. What amount...

Lunar Eclipse Inc. follows IFRS and has the following amounts for the year ended December 31,...

Lunar Eclipse Inc. follows IFRS and has the following amounts for the year ended December 31, 2018: gain on sale of FV-NI investments (before tax), $15,000; loss from operation of discontinued division (net of tax), $42,000; income from operations (before tax), $220,000; unrealized holding gain-OCI (net of tax), $12,000; income tax on income from continuing operations, $63,000; loss from disposal of discontinued division (net of tax), $75,000. The unrealized holding gain-OCI relates to investments that are not quoted in an...

3. Delray Inc. follows IFRS and has the following amounts for the year ended December 31,...

3. Delray Inc. follows IFRS and has the following amounts for the year ended December 31, 2020: gain on disposal of FV-NI investments (before tax), $15,000; loss from operation of discontinued division (net of tax), $42,000; income from operations (before tax), $220,000; unrealized holding gain-OCI (net of tax) $12,000; income tax on income from continuing operations, $63,000; loss on disposal of discontinued division (net of tax), $75,000. The unrealized holding gain-OCI relates to investments that are not quoted in an...

Subjects