Question
In: Accounting
On January 1, 2017, Teal Company contracts to lease equipment for 5 years, agreeing to make...
On January 1, 2017, Teal Company contracts to lease equipment for 5 years, agreeing to make a payment of $164,292 at the beginning of each year, starting January 1, 2017. The leased equipment is to be capitalized at $674,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Teal’s incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Teal. Title to the equipment transfers to Teal at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.
a. Prepare the journal entries that Teal should record on January 1, 2017.
January 1, 2017
Dr.
Cr.
(To record the lease.)
Dr.
Cr.
|
(To record lease payment.) |
b. Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2017.
December 31, 2017
Dr.
Cr.
(To record amortization of the leased asset.)
Dr.
Cr.
c.Prepare the journal entry to record the lease payment of January 1, 2018, assuming reversing entries are not made.
January 1,2018
Dr.
Cr.
d. What amounts will appear on the lessee’s December 31, 2017, balance sheet relative to the lease contract?
e. How would the value of the lease liability in part (b) change if Teal also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2017, Cullumber Company contracts to lease equipment for 5 years, agreeing to make...
On January 1, 2017, Cullumber Company contracts to lease
equipment for 5 years, agreeing to make a payment of $140,532 at
the beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $586,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Cullumber’s
incremental borrowing rate is 6%, and the implicit rate in the
lease is 10%, which is known by Cullumber....
On January 1, 2017, Cage Company contracts to lease equipment for 5 years, agreeing to make...
On January 1, 2017, Cage Company contracts to lease equipment
for 5 years, agreeing to make a payment of $120,987 at the
beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $550,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Cage’s incremental
borrowing rate is 6%, and the implicit rate in the lease is 5%,
which is known by Cage....
On January 1, 2017, Cage Company contracts to lease equipment for 5 years, agreeing to make...
On January 1, 2017, Cage Company contracts to lease equipment
for 5 years, agreeing to make a payment of $120,987 at the
beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $550,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Cage’s incremental
borrowing rate is 6%, and the implicit rate in the lease is 5%,
which is known by Cage....
On January 1, 2020, Cage Company contracts to lease equipment for 5 years, agreeing to make...
On January 1, 2020, Cage Company contracts to lease equipment
for 5 years, agreeing to make a payment of $120,987 at the
beginning of each year, starting January 1, 2020. The leased
equipment is to be capitalized at $550,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Cage’s incremental
borrowing rate is 6%, and the implicit rate in the lease is 5%,
which is known by Cage....
Problem 21A-2 b-f On January 1, 2017, Cage Company contracts to lease equipment for 5 years,...
Problem 21A-2 b-f
On January 1, 2017, Cage Company contracts to lease equipment
for 5 years, agreeing to make a payment of $120,987 at the
beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $550,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Cage’s incremental
borrowing rate is 6%, and the implicit rate in the lease is 5%,
which is...
Teal Mountain Leasing Company signs a lease agreement on January 1, 2020, to lease electronic equipment...
Teal Mountain Leasing Company signs a lease agreement on January
1, 2020, to lease electronic equipment to Sandhill Company. The
term of the non-cancelable lease is 2 years, and payments are
required at the end of each year. The following information relates
to this agreement:
1.
Sandhill has the option to purchase the equipment for $25,000
upon termination of the lease. It is not reasonably certain that
Sandhill will exercise this option.
2.
The equipment has a cost of $300,000...
Exercise 21A-6 a-b Teal Mountain Leasing Company signs a lease agreement on January 1, 2017, to...
Exercise 21A-6 a-b
Teal Mountain Leasing Company signs a lease agreement on January
1, 2017, to lease electronic equipment to Sandhill Company. The
term of the non-cancelable lease is 2 years, and payments are
required at the end of each year. The following information relates
to this agreement:
1.
Sandhill has the option to purchase the equipment for $25,000
upon termination of the lease. It is not reasonably certain that
Sandhill will exercise this option.
2.
The equipment has a...
Larkspur Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to...
Larkspur Leasing Company signs a lease agreement on January 1,
2017, to lease electronic equipment to Crane Company. The term of
the non-cancelable lease is 2 years, and payments are required at
the end of each year. The following information relates to this
agreement: 1. Crane has the option to purchase the equipment for
$15,500 upon termination of the lease. It is not reasonably certain
that Crane will exercise this option. 2. The equipment has a cost
of $110,000 and...
Castle Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to...
Castle Leasing Company signs a lease agreement on January 1,
2017, to lease electronic equipment to Jan Way Company. The term of
the non-cancelable lease is 2 years, and payments are required at
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 this option.
2. The equipment has a cost...
Bonita Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to...
Bonita Leasing Company signs a lease agreement on January 1,
2017, to lease electronic equipment to Windsor Company. The term of
the noncancelable lease is 2 years, and payments are required at
the end of each year. The following information relates to this
agreement: 1. Windsor Company has the option to purchase the
equipment for $17,100 upon termination of the lease. 2. The
equipment has a cost and fair value of $166,000 to Bonita Leasing
Company. The useful economic life...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Kant says that to act morally is to act out of duty. How does this differ...
- Suppose you are trying to determine the capacity (in gallons) of the gas tank needed on...
- List the arithmetic operators used in BASIC and state their priorities of execution in a statement....
- Describe the espoused values of a company you have worked for (or been exposed to -...
- Can you explain to me the differnces in how we paid for the health care (access...
- Discuss proactive and defensive marketing in context to the company position in the hypothetical market structure...
- Write a java code that could be used to show the simulation of a tornado. use...
ADVERTISEMENT