Question
In: Accounting
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 known by Cage. Title to the equipment transfers to Cage at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Prepare the journal entries that Cage should record on January 1, 2017
January 1,2017 (to record the lease)
(to record payment of lease)
Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2017
December 31,2017 (to record amorizitaiton of leased asset)
December 31,2017
Prepare the journal entry to record the lease payment of January 1, 2018, assuming reversing entries are not made.
January 1,2018
What amounts will appear on the lessee’s December 31, 2017,
balance sheet relative to the lease contract?
How would the value of the lease liability in part (b) change if Cage also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments?
the lease liabilty $
Please answer all the parts to my question
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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....
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, 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....
Problem 21A-6 b-f (Part Level Submission) Stellar Leasing Company agrees to lease equipment to Pearl Corporation...
Problem 21A-6 b-f (Part Level Submission)
Stellar Leasing Company agrees to lease equipment to Pearl
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 $520,000, and the fair
value of the asset on January 1, 2017, is $737,000. 3. At the end
of the lease...
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...
Exercise 21A-5 a-c Sage Hill Leasing Company signs an agreement on January 1, 2017, to lease...
Exercise 21A-5 a-c
Sage Hill Leasing Company signs an agreement on January 1, 2017,
to lease equipment to Cole Company. The following information
relates 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 $401,000. The fair value
of the asset at January 1, 2017, is $401,000.
3.
The asset will revert to...
Problem 21A-3 a-d Marin Steel Company, as lessee, signed a lease agreement for equipment for 5...
Problem 21A-3 a-d
Marin Steel Company, as lessee, signed a lease agreement for
equipment for 5 years, beginning December 31, 2017. Annual rental
payments of $46,000 are to be made at the beginning of each lease
year (December 31). The interest rate used by the lessor in setting
the payment schedule is 7%; Marin’s incremental borrowing rate is
9%. Marin is unaware of the rate being used by the lessor. At the
end of the lease, Marin has the option...
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...
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