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Exercise 21-23 Assume that on January 1, 2020, Elmer’s Restaurants sells a computer system to Pharoah...
Exercise 21-23 Assume that on January 1, 2020, Elmer’s Restaurants sells a computer system to Pharoah Finance Co. for $780,000 and immediately leases the computer system back. The relevant information is as follows.
1. The computer was carried on Elmer’s books at a value of $700,000.
2. The term of the non-cancelable lease is 3 years; title will not transfer to Elmer’s, and the expected residual value at the end of the lease is $550,000, all of which is unguaranteed.
3. The lease agreement requires equal rental payments of $115,490 at the beginning of each year.
4. The incremental borrowing rate for Elmer is 5%. Elmer is aware that Pharoah Finance Co. set the annual rental to insure a rate of return of 5%.
5. The computer has a fair value of $780,000 on January 1, 2020, and an estimated economic life of 10 years.
Prepare the journal entries for both the lessee and the lessor for 2020 to reflect the sale and leaseback agreement
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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1.
The computer was carried on Elmer’s books at a value of
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2.
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Exercise 21-12 (Part Level Submission)
On January 1, 2020, Pharoah Company leased equipment to Flynn
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1.The term of the non-cancelable lease is 6 years. At the end of
the lease term, Flynn has the option to purchase the equipment for
$1,000, while the expected residual value at the end of the lease
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Exercise 21-12 (Part Level Submission) On January 1, 2020, Pharoah Company leased equipment to Flynn Corporation....
Exercise 21-12 (Part Level Submission) On January 1, 2020,
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following information pertains to this lease.
1. The term of the non-cancelable lease is 6 years. At the end
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lease is $9,000.
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each 10 Sale 410 units at $20 each 15 Purchase 410 units at $9.50
each 21 Sale 460 units at $21 each 30 Purchase 360 units at $9.80
each Pharoah uses the FIFO cost flow assumption. All purchases and
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Exercise 21-05
Morgan Leasing Company signs an agreement on January 1, 2020, to
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to this agreement.
1.
The term of the non-cancelable lease is 6 years with no renewal
option. The equipment has an estimated economic life of 6
years.
2.
The cost of the asset to the lessor is $245,000. The fair value
of the asset at January 1, 2020, is $245,000.
3.
The asset will revert to the lessor...
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Exercise 21-05
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1.
The term of the non-cancelable lease is 6 years with no renewal
option. The equipment has an estimated economic life of 6
years.
2.
The cost of the asset to the lessor is $291,000. The fair value
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3.
The asset will revert to the...
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On January 1, 2020, Marin Co. leased a building to Cullumber
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1.
The lease arrangement is for 10 years. The building is expected
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2.
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3.
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Question 23
Assume that on January 1, 2021, Metlock Corporation sells equipment
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the equipment. The relevant information is as follows.
1.
The equipment was carried on
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2.
The term of the non-cancelable
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3.
The lease...
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At December 31, 2020, the inventory was $291,500,300 at cost and
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Prepare the necessary December 31 entry under (a) the
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No.
Account Titles and Explanation
Debit
Credit
(a)
enter an account title
enter an account title
(b)
enter an account title
enter an account title
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