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Brief Exercise 15-6 Sales-type lease; lessor; income statement effects [LO15-3] A lease agreement that qualifies as...
Brief Exercise 15-6 Sales-type lease; lessor; income statement effects [LO15-3]
A lease agreement that qualifies as a finance lease calls for
annual lease payments of $50,000 over a four-year lease term (also
the asset’s useful life), with the first payment at January 1, the
beginning of the lease. The interest rate is 7%. The lessor’s
fiscal year is the calendar year. The lessor manufactured this
asset at a cost of $144,000. (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:
a. Determine the price at which the lessor is “selling” the asset
(present value of the lease payments).
b. Create a partial amortization through the first payment on
January 1, 2017.
c. What would be the amounts related to the lease that the lessor
would report in its income statement for the year ended December 31
(ignore taxes)?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
A lessor and a lessee signed a lease agreement that qualifies as a finance/sales-type lease and...
A lessor and a lessee signed a lease agreement that qualifies as
a finance/sales-type lease and calls for annual lease payments of
$26,269 over a six-year lease term. The asset's estimated useful
life is also six years. The first payment is due on January 1st,
which is the beginning of the lease. The interest rate is 5%. Based
on these facts, the present value of the lease payments (which are
equal to the value of the asset to the lessor)...
Exercise 15-25 Lessor; sales-type lease; residual value effect on financial statements [LO15-2, 15-6] At January 1,...
Exercise 15-25 Lessor; sales-type lease; residual value effect
on financial statements [LO15-2, 15-6]
At January 1, 2018, Café Med leased restaurant equipment from
Crescent Corporation under a nine-year lease agreement. The lease
agreement specifies annual payments of $30,000 beginning January 1,
2018, the beginning of the lease, and at each December 31
thereafter through 2025. The equipment was acquired recently by
Crescent at a cost of $225,000 (its fair value) and was expected to
have a useful life of 13...
Exercise 15-30 (Algo) Purchase option; lessor; sales-type lease; no selling profit [LO15-2, 15-6] Universal Leasing leases...
Exercise 15-30 (Algo) Purchase option; lessor; sales-type lease;
no selling profit [LO15-2, 15-6]
Universal Leasing leases electronic equipment to a variety of
businesses. The company’s primary service is providing alternate
financing by acquiring equipment and leasing it to customers under
long-term sales-type leases. Universal earns interest under these
arrangements at a 9% annual rate.
The company leased an electronic typesetting machine it purchased
for $49,900 to a local publisher, Desktop Inc., on December 31,
2020. The lease contract specified...
Exercise 15-3 Finance lease; lessee; balance sheet and income statement effects [LO15-2] On June 30, 2018,...
Exercise 15-3 Finance lease; lessee; balance sheet and income
statement effects [LO15-2] 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 $559,946 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 10%, the same rate
IC uses to calculate lease payment amounts. Depreciation is
recorded on a...
Exercise 15-8 Capital lease; lessee; balance sheet and income statement effects [LO15-5] On June 30, 2016,...
Exercise 15-8 Capital lease; lessee; balance sheet and income
statement effects [LO15-5] On June 30, 2016, Georgia-Atlantic,
Inc., leased a warehouse facility from IC Leasing Corporation. The
lease agreement calls for Georgia-Atlantic to make semiannual lease
payments of $648,358 over a four-year lease term, payable each June
30 and December 31, with the first payment at June 30,
2016.Georgia-Atlantic’s incremental borrowing rate is 10%, the same
rate IC used to calculate lease payment amounts. Depreciation is
recorded on a straight-line...
Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy...
Problem 15-4 (Algo) Finance/sales-type lease; lessee and lessor
[LO15-1, 15-2, 15-3]
Rand Medical manufactures lithotripters. Lithotripsy uses shock
waves instead of surgery to eliminate kidney stones. Physicians’
Leasing purchased a lithotripter from Rand for $2,590,000 and
leased it to Mid-South Urologists Group, Inc., on January 1, 2021.
(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.)
Lease Description:
Quarterly lease payments
$...
Brief Exercise 15-17 Lessor; effect on earnings; Type B lease At January 1, 2016, Café Med...
Brief Exercise 15-17 Lessor; effect on earnings; Type B
lease
At January 1, 2016, Café Med leased restaurant equipment from
Crescent Corporation under a Eight-year lease agreement. The lease
agreement specifies annual payments of $35,000 beginning January 1,
2016, the beginning of the lease, and at each December 31
thereafter through 2023. The equipment was acquired recently by
Crescent at a cost of $185,000 (its fair value) and was expected to
have a useful life of 12 years with no...
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5] Each...
Exercise 15-12 Lessor calculation of annual lease payments;
lessee calculation of asset and liability [LO15-5] Each of the
three independent situations below describes a capital lease in
which annual lease payments are payable at the beginning of each
year. The lessee is aware of the lessor’s implicit rate of return.
(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.) Situation
1 2 3...
Exercise 15-12 Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-5] Each...
Exercise 15-12 Lessor calculation of annual lease payments;
lessee calculation of asset and liability [LO15-5] Each of the
three independent situations below describes a capital lease in
which annual lease payments are payable at the beginning of each
year. The lessee is aware of the lessor’s implicit rate of return.
(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.) Situation
1 2 3...
(Lessor Entries; Sales-Type Lease with Option to Purchase) Castle Leasing Company signs a lease agreement on...
(Lessor Entries; Sales-Type Lease with Option to Purchase)
Castle Leasing Company signs a lease agreement on January 1,
2017, to lease electronic equipment to Jan Way Company. The term of
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the end of each year. The following information relates to this
agreement.
1.
Jan Way has the option to purchase the equipment for $16,000
upon termination of the lease. It is not reasonably certain
that Jan Way will exercise...
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