Question
In: Accounting
(LO 3, 4 ) (Accounting for an Operating Lease) On January 1, 2020, a machine was...
(LO 3, 4 ) (Accounting for an Operating Lease) On January 1, 2020, a machine was purchased for $900,000 by Young Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to St. Leger Inc. for 3 years on January 1, 2020, with annual rent payments of $150,955 due at the beginning of each year, starting January 1, 2020. The machine is expected to have a residual value at the end of the lease term of $562,500, though this amount is unguaranteed. Instructions
A. How much should Young report as income before income tax on this lease for 2020?
B. Record the journal entries St. Leger would record for 2020 on this lease, assuming its incremental borrowing rate is 6% and the rate implicit in the lease is unknown.
C. Suppose the lease was only for one year (only one payment of the same amount at commencement of the lease), with a renewal option at market rates at the end of the lease, and St. Leger elects to use the short-term lease exception. Record the journal entries St. Leger would record for 2020 on this lease.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
. On January 3, 2020, Hanna Corp signed a lease on a machine and the lease...
. On January 3, 2020, Hanna Corp signed a lease on a machine and
the lease commences the same date. The lease requires Hanna too
make six annual lease payments of $12000 with the first payment due
on December 31, 2020. Hanna could have financed the machine by
borrowing at an interest rate of 7%. What entries would the company
record on Jan 3 and December 31, 2020 if the lease is classified as
a finance lease?
Accounting for Leases On January 3, 2017, Hanna Corporation signed a lease on a machine for...
Accounting for Leases
On January 3, 2017, Hanna Corporation signed a lease on a machine
for its manufacturing operation. The lease requires Hanna to make
six annual lease payments of $12,000 with the first payment due
December 31, 2017. Hanna could have financed the machine by
borrowing the purchase price at an interest rate of 7%.
a. Prepare the journal entries that Hanna Corporation would make
on January 3 and December 31, 2017, to record this lease assuming
its i....
Accounting for Leases On January 3, 2017, Hanna Corporation signed a lease on a machine for...
Accounting for Leases
On January 3, 2017, Hanna Corporation signed a lease on a machine
for its manufacturing operation. The lease requires Hanna to make
six annual lease payments of $18,000 with the first payment due
December 31, 2017. Hanna could have financed the machine by
borrowing the purchase price at an interest rate of 5%.
a. Prepare the journal entries that Hanna Corporation would make
on January 3 and December 31, 2017, to record this lease assuming
its i....
Lease accounting Assume rhe following 1. A 3-year lease in initiated on January 1, X1 for...
Lease accounting
Assume rhe following
1. A 3-year lease in initiated on January 1, X1 for equipment
having an expected economic life of 5 year and a fair value of
S144.288
2. Three annual lease payments $52,000 are required beginning
January 1, X1. Two thousand dollars of the lease pavments are to
cover various expenditures of the lessor related to property taxes
and insurance.
3. The lease agreement includes a bargain purchase option whereby
the lessee can purchase the equipment...
Required information CC11-1 Accounting for Equity Financing [LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO...
Required information CC11-1 Accounting for Equity Financing [LO
11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5] [The following
information applies to the questions displayed below.]
Nicole has been financing Nicole’s Getaway Spa (NGS) using equity
financing. Currently NGS has authorized 100,000 no-par preferred
shares and 200,000 $2 par common shares. Outstanding shares include
59,000 preferred shares and 49,000 common shares.
Recently the following transactions have taken
place. NGS issues 1,450 preferred shares for $12
a share. NGS repurchases 1,450...
Required information CC11-1 Accounting for Equity Financing [LO 11-1, LO 11-2, LO 11-3, LO 11-4, LO...
Required information CC11-1 Accounting for Equity Financing [LO
11-1, LO 11-2, LO 11-3, LO 11-4, LO 11-5] [The following
information applies to the questions displayed below.]
Nicole has been financing Nicole’s Getaway Spa (NGS) using equity
financing. Currently NGS has authorized 100,000 no-par preferred
shares and 200,000 $2 par common shares. Outstanding shares include
59,000 preferred shares and 49,000 common shares.
Recently the following transactions have taken
place. NGS issues 1,450 preferred shares for $12
a share. NGS repurchases 1,450...
The following relate to an operating lease agreement: The lease term is 3 years, beginning January...
The following relate to an operating lease agreement:
The lease term is 3 years, beginning January 1, 2018.
The leased asset cost the lessor $850,000 and had a useful life
of eight years with no residual value. The lessor uses
straight-line depreciation for its depreciable assets.
Annual lease payments at the beginning of each year were
$144,500.
Incremental costs of negotiating costs of negotiating and
consummating the completed lease transaction incurred by the lessor
were $3,150.
Required:
Prepare the appropriate...
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah Inc. The lease agreement calls...
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah
Inc. The lease agreement calls for Nivtop to make four annual lease
payments of $559,113 each January 1, with the first payment to be
made on January 1, 2020. Nivtop’s incremental borrowing rate is 8%;
this is the same rate Nosnah used to calculate the lease payments.
The fair market value of the machine is $2,000,000 and its expected
useful life is 5 years. This is a non-specialized machine....
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah Inc. The lease agreement calls...
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah
Inc. The lease agreement calls for
Nivtop to make four annual lease payments of $559,113 each January
1, with the first payment to be
made on January 1, 2020. Nivtop’s incremental borrowing rate is 8%;
this is the same rate Nosnah
used to calculate the lease payments. The fair market value of the
machine is $2,000,000 and its
expected useful life is 5 years. This is a non-specialized
machine....
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah Inc. The lease agreement calls...
On January 1, 2020, Nivtop Corp. leased a machine from Nosnah
Inc. The lease agreement calls for
Nivtop to make four annual lease payments of $559,113 each January
1, with the first payment to be
made on January 1, 2020. Nivtop’s incremental borrowing rate is 8%;
this is the same rate Nosnah
used to calculate the lease payments. The fair market value of the
machine is $2,000,000 and its
expected useful life is 5 years. This is a non-specialized
machine....
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