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In: Accounting
Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January...
Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January 1, 2011. The annual lease payments of $350,000 are made at the end of each year. The total present value of the annual lease payments at 10% is $870,398. The guaranteed residual value at the end of the lease term is $100,000 and Hughey Co. expects the leased machinery to have an actual residual value of 80,000. The present value factor for a single sum at 10% and 3 years is 0.75131. The machine reverts to the lessor at the end of the lease term. Hughey uses the effective-interest method and straight-line amortization. Hughey classifies the lease as a finance lease. Please round your calculations to the nearest dollar.
(a) Prepare a lease amortization schedule.
(b) Prepare all of the lessee's journal entries for 2011.
(c) Prepare all of the lessee's journal entries for 2013, assuming that the machine is worth $50,000 at the end of the lease term when it is returned to the lessor.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Huffy Co., a lessee, records a finance lease of machinery on January 1, 2020. The five...
Huffy Co., a lessee, records a finance lease of machinery on
January 1, 2020. The five annual lease payments of $525,000 are
made at the beginning of each year. The present value of the lease
payments at 10% is $2,189,180. Huffy uses straight-line
depreciation with no salvage value.
Prepare an amortization table for the life of the lease. Round
all amounts to the nearest dollar.
Amortization Table
Lease Liability
Lease payment
Interest
Principal
2020
2021
2022
2023
2024
b. Prepare...
Question 21 Wildhorse Co. as lessee records a finance lease of machinery on January 1, 2021....
Question 21
Wildhorse Co. as lessee records a finance lease of machinery on
January 1, 2021. The seven annual lease payments of $750,000 are
made at the end of each year. The present value of the lease
payments at 10% is $3,651,000. Wildhorse uses the
effective-interest method of amortization and
sum-of-the-years'-digits depreciation (no residual
value).
Prepare an amortization table for 20121 and 2022.
Wildhorse Co.
Lease Amortization Schedule
Date
Annual Lease
Receipt/Payment
Interest on
Receivable/Liability
Reduction in
Receivable/Liability
Lease
Receivable/Liability...
Recording Finance Lease Journal Entries— Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement...
Recording Finance Lease Journal Entries— Guaranteed
Residual Value
Smith, the lessee, signs an 8-year lease agreement of a floor of
a building on December 31, 2020, that requires annual payments of
$70,000, beginning immediately. The residual value is guaranteed to
the lessor of $50,000 at the end of the lease term. Smith estimates
that the residual will have a value of $30,000 at the end of the
lease term. Smith is aware of the lessor’s implicit rate of
interest of...
Christopher Donegan Company as lessee records a capital lease of machinery on January 1, 2013. The...
Christopher Donegan Company as lessee records a capital lease of
machinery on January 1, 2013. The seven annual lease payments of
$525,000 are made at the end of each year. The present
value of the lease payments at 10% is
$2,556,000. Donegan uses the effective-interest method
of amortization and straight line depreciation (no residual
value).
Complete the following amortization table for the years 2013 to
2015.
Date
Interest
Lease Payment
Reduction of Liability
Lease Liability
1/1/13
$2,556,000
12/31/13
12/31/14
12/31/15
Prepare all of...
P21-8 (L02,4) (Lessee Computations and Entries, Finance Lease with Guaranteed Residual Value) data as in P21-7...
P21-8 (L02,4) (Lessee Computations and Entries, Finance Lease
with Guaranteed Residual Value)
data as in P21-7 and that Chambers Medical Center has an
incremental borrowing rate of 5% and an expected residual value at
the end of the lease of $10,000
21-7 information was as follows:
Amirante Inc. manufactures an X-ray machine with an estimated
life of 12 years and leases it to Chambers Medical Center for a
period of 10 years. The normal selling price of the machine is...
Host Co as a lessee records a finance lease of machinery on 1/1/19. The 7 annual...
Host Co as a lessee records a finance lease of machinery on
1/1/19. The 7 annual lease payments of $210,000 are made at the end
of each year. The present value of the lease payments at 10% is
$1,022,400.
Prepare a lease amortization schedule from 1/1/19 to
12/31/21.
Prepare the journal entries for Host from 1/1/19 to
12/31/20.
SHOW ALL COMPUTATIONS.
Problem 15-18A Lessee-guaranteed residual value; unguaranteed residual value; different interest rates for lessor and lessee [LO15-3,...
Problem 15-18A Lessee-guaranteed residual value; unguaranteed
residual value; different interest rates for lessor and lessee
[LO15-3, 15-6, 15-7] On December 31, 2018, Yard Art Landscaping
leased a delivery truck from Branch Motors. Branch paid $36,000 for
the truck. Its retail value is $49,355. The lease agreement
specified annual payments of $12,000 beginning December 31, 2018,
the beginning of the lease, and at each December 31 through 2021.
Branch Motors’ interest rate for determining payments was 10%. At
the end of...
P21-6 (Lessee-Lessor Entries, Finance Lease with a Guaranteed Residual Value) (LO 2, 4) Glaus Leasing Company...
P21-6 (Lessee-Lessor Entries, Finance Lease with a Guaranteed
Residual Value) (LO 2, 4) Glaus Leasing Company agrees to lease
equipment to Jensen Corporation on January 1, 2017. The following
information relates to the lease agreement. 1.The term of the lease
is 7 years with no renewal option, and the machinery has an
estimated economic life of 9 years. 2.The cost of the machinery is
$525,000, and the fair value of the asset on January 1, 2017, is
$700,000. 3.At the...
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year noncancelable lease agreement to lease a...
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year
noncancelable lease agreement to lease a storage building from DIY
Storage Company (lessor). The following information pertains to
this lease agreement:
• The agreement requires equal rental payments of $76,332
beginning on December 31, 1996. The annual payment includes $3,000
as reimbursement of property taxes.
• The fair value of the building on January 1, 1996 is $453,000.
On DIY’s book, it has a cost of $400,000.
• The building...
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year noncancelable lease agreement to lease a...
On January 1, 1996, ParkOne Co. (lessee) signs a 10-year
noncancelable lease agreement to lease a storage building from DIY
Storage Company (lessor). The following information pertains to
this lease agreement:
• The agreement requires equal rental payments of $76,332
beginning on December 31, 1996. The annual payment includes $3,000
as reimbursement of property taxes.
• The fair value of the building on January 1, 1996 is $453,000.
On DIY’s book, it has a cost of $400,000.
• The building...
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