On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years....

On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 2018. Vaughn’s incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease under ASU 2016-02. Use the appropriate factors (PV of 1, PVAD of 1, and PVOA of 1).

3) How much of the lease liability should be classified as current on December 31, 2017, and December 31, 2018?

P.S. I already got the value of the leased equipment, which is $36,959. The rent expense for 2017 is $2,500 and for 2018 is $10,000

Solutions

Expert Solution

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years....

On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 2018. Vaughn’s incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease under ASU 2016-02. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate...

On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years....

On October 1, 2017, Vaughn, Inc., leased a machine from Fell Leasing Company for five years. The lease requires five annual payments of $10,000 beginning September 30, 2018. Vaughn’s incremental borrowing rate is 11%, and it uses a calendar year for reporting purposes. The machine has a 12-year economic life with zero salvage value. Vaughn correctly classifies the lease as an operating lease under ASU 2016-02. Using (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate...

Rambler Company leased a machine from Basket Leasing Company. The lease is for 4 years. The...

Rambler Company leased a machine from Basket Leasing Company. The lease is for 4 years. The life of the asset is 5 years. The terms of the lease require 4 payments of $100,000 at the beginning of the year, beginning on January 1, 2017. Rambler does not know Basket’s rate. There is an unguaranteed residual value of $15,000 at the end of year 4. At the end of year 4, the equipment is worth $12,000. Rambler also assumes property tax...

On October 1, 2021, Sonoma Company leased equipment from Napa Inc. in lease payable in five...

On October 1, 2021, Sonoma Company leased equipment from Napa Inc. in lease payable in five equal annual payments of $590,000, beginning Oct 1, 2022. Similar transactions have carried an 9% interest rate. The right-of-use asset would be recorded at:

ASD Company leased equipment from ZXC Leasing Company on January 1, 2017. ZXC Leasing Company purchased...

ASD Company leased equipment from ZXC Leasing Company on January 1, 2017. ZXC Leasing Company purchased the equipment from QWE Company at a cost of $85,000 and added the equipment to its inventory of items available for lease. Additional details of the lease are as follows. Quarterly lease payments $15,000 Lease term 2 years Asset's useful life 6 years Asset's fair value at date of inception $113,000 Purchase option lessee is reasonably certain to exercise No Title transfer after lease...

Elf Leasing purchased a machine for $410,000 and leased it to IGA, Inc. on January 1,...

Elf Leasing purchased a machine for $410,000 and leased it to IGA, Inc. on January 1, 2018. Lease description: Quarterly rental payments $23,504 at beginning of each period Lease term 6 years (24 quarters) No residual value; no BPO Economic life of machine 6 years Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset $410,000 Required: Prepare appropriate entries for both IGA and Elf Leasing from the beginning of the lease through the second rental payment...

Elf Leasing purchased a machine for $420,000 and leased it to IGA, Inc. on January 1,...

Elf Leasing purchased a machine for $420,000 and leased it to IGA, Inc. on January 1, 2018. Lease description: Quarterly rental payments $27,408 at beginning of each period Lease term 5 years (20 quarters) No residual value; no BPO Economic life of machine 5 years Implicit interest rate and lessee’s incremental borrowing rate 12% Fair value of asset $420,000 Required: Prepare appropriate entries for both IGA and Elf Leasing from the beginning of the lease through the second rental payment...

Jayhawk Company leased a machine from Houston Leasing. The machine had a 5 year life. the...

Jayhawk Company leased a machine from Houston Leasing. The machine had a 5 year life. the lease was for three years and required three payments of $300,000 each made at the beginning of the year starting with January 1, 2018. The lease was non-cancelable, and title did not pass at the end of the lease. There was no bargain purchase right either. However, the present value of the minimum lease payments was greater than 90% of the fair value on...

Jayhawk Company leased a machine from Houston Leasing. The machine had a 5 year life. The...

Jayhawk Company leased a machine from Houston Leasing. The machine had a 5 year life. The lease was for three years and required three payments of $200,000 each made at the beginning of the year starting with January 1, 2017. The lease was non-cancellable, and title did not pass at the end of the lease. There was no bargain purchase right either. However, the present value of the minimum lease payments was greater than 90% of the fair value on...

Vaughn Leasing Company agrees to lease machinery to Bramble Corporation on January 1, 2017. The following...

Vaughn Leasing Company agrees to lease machinery to Bramble Corporation on January 1, 2017. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $575,000, and the fair value of the asset on January 1, 2017, is $755,000. 3. At the end of the lease term, the asset reverts to the...

Subjects