Question
In: Accounting
On June 30, 2021, Blue, Inc. leased a machine from Large Leasing Corporation. The lease agreement...
On June 30, 2021, Blue, Inc. leased a machine from Large Leasing Corporation. The lease agreement calls for Blue to make semiannual lease payments of $298,341 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2021. Blue’s incremental borrowing rate is 10%, the same rate Big uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. Large constructed the machine at a cost of $1,331,000. (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. Determine the price at which Large is “selling” the machine (present value of the lease payments) at June 30, 2021. 2. What would be the amounts related to the lease that Large would report in its balance sheet at December 31, 2021? (Ignore taxes.) 3. What would be the amounts related to the lease that Large would report in its income statement for the year ended December 31, 2021? (Ignore taxes.)
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On June 30, 2021, Blue, Inc. leased a machine from Large Leasing Corporation. The lease agreement...
On June 30, 2021, Blue, Inc. leased a machine from Large Leasing
Corporation. The lease agreement calls for Blue to make semiannual
lease payments of $224,843 over a four-year lease term, payable
each June 30 and December 31, with the first payment at June 30,
2021. Blue’s incremental borrowing rate is 12%, the same rate Big
uses to calculate lease payment amounts. Depreciation is recorded
on a straight-line basis at the end of each fiscal year. Large
constructed the machine...
On June 30, 2016, Blue, Inc., leased a machine from Big Leasing Corporation. The lease agreement...
On June 30, 2016, Blue, Inc., leased a machine from Big Leasing
Corporation. The lease agreement qualifies as a capital lease and
calls for Blue to make semiannual lease payments of $214,208 over a
four-year lease term, payable each June 30 and December 31, with
the first payment at June 30, 2016. Blue’s incremental borrowing
rate is 12%, the same rate Big uses to calculate lease payment
amounts. Depreciation is recorded on a straight-line basis at the
end of each...
On June 30, 2018, Blue, Inc. leased a machine from Big Leasing Corporation. The lease agreement...
On June 30, 2018, Blue, Inc. leased a machine from Big Leasing
Corporation. The lease agreement qualifies as a capital lease and
calls for Blue to make semiannual lease payments of $286,143 over a
three-year lease term, payable each June 30 and December 31, with
the first payment at June 30, 2018. Blue’s incremental borrowing
rate is 8%, the same rate Big uses to calculate lease payment
amounts. The lease agreement qualifies as a finance lease.
Amortization is recorded on...
On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease...
On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse
equipment from IC Leasing Corporation. The lease agreement calls
for Georgia-Atlantic to make semiannual lease payments of $530,203
over a four-year lease term, payable each June 30 and December 31,
with the first payment at June 30, 2021. Georgia-Atlantic's
incremental borrowing rate is 12%, the same rate IC uses to
calculate lease payment amounts. Amortization is recorded on a
straight-line basis at the end of each fiscal year. The fair value...
On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse equipment from IC Leasing Corporation. The lease...
On June 30, 2021, Georgia-Atlantic, Inc. leased a warehouse
equipment from IC Leasing Corporation. The lease agreement calls
for Georgia-Atlantic to make semiannual lease payments of $677,829
over a four-year lease term, payable each June 30 and December 31,
with the first payment at June 30, 2021. Georgia-Atlantic's
incremental borrowing rate is 10%, the same rate IC uses to
calculate lease payment amounts. Amortization is recorded on a
straight-line basis at the end of each fiscal year. The fair value...
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from IC Leasing Corporation. The lease agreement...
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse
equipment from IC Leasing Corporation. The lease agreement calls
for Georgia-Atlantic to make semiannual lease payments of $779,224
over a three-year lease term, payable each June 30 and December 31,
with the first payment at June 30, 2018. Georgia-Atlantic’s
incremental borrowing rate is 9%, the same rate IC used to
calculate lease payment amounts. IC purchased the warehouse from
Builders, Inc.. at a cost of $4.2 million. (FV of $1, PV of...
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse equipment from IC Leasing Corporation. The lease agreement...
On June 30, 2018, Georgia-Atlantic, Inc., leased warehouse
equipment from IC Leasing Corporation. The lease agreement calls
for Georgia-Atlantic to make semiannual lease payments of $403,067
over a five-year lease term, payable each June 30 and December 31,
with the first payment at June 30, 2018. Georgia-Atlantic’s
incremental borrowing rate is 8%, the same rate IC used to
calculate lease payment amounts. IC purchased the equipment from
Builders, Inc.. at a cost of $3.4 million. (FV of $1, PV of...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from Builders, Inc. The lease agreement calls...
On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse
equipment from Builders, Inc. The lease agreement calls for
Georgia-Atlantic to make semiannual lease payments of $545,210 over
a 4-year lease term (also the asset’s useful life), payable each
June 30 and December 31, with the first payment at June 30, 2021.
Georgia-Atlantic's incremental borrowing rate is 10.0%, the same
rate Builders used to calculate lease payment amounts. Builders
manufactured the equipment at a cost of $3.2 million. (FV of $1, PV...
On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease...
On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse
facility from IC Leasing Corporation. The lease agreement calls for
Georgia-Atlantic to make semiannual lease payments of $478,550 over
a four-year lease term, payable each June 30 and December 31, with
the first payment at June 30, 2018. Georgia-Atlantic’s incremental
borrowing rate is 12%, the same rate IC uses to calculate lease
payment amounts. Depreciation is recorded on a straight-line basis
at the end of each fiscal year. The fair value...
On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease...
On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse
facility from IC Leasing Corporation. The lease agreement calls for
Georgia-Atlantic to make semiannual lease payments of $779,353 over
a four-year lease term, payable each June 30 and December 31, with
the first payment at June 30, 2018. Georgia-Atlantic’s incremental
borrowing rate is 12%, the same rate IC uses to calculate lease
payment amounts. Depreciation is recorded on a straight-line basis
at the end of each fiscal year. The fair value...
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