Question
In: Accounting
Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment....
Jay Company, as lessee, enters into a lease agreement on January
1, 2020, to lease equipment. The following data are relevant to the
lease agreement.
- The term of the noncancellable lease is three years, with no
renewal option. Payments of $12,000 are due on January 1, of each
year.
- The fair value of the equipment on January 1, 2020 is $35,000.
The equipment has an estimated economic life of five years, and an
unguarenteed residual value of $4,000.
- The equipment reverts back to the lessor at the termination of
the lease and is expected to have use to the lessor.
- The lessee is aware that the lessor used an implicit rate of
6%.
(Present Value & Future Value Tables are provided on pages 3
and 4)
Instructions:
1. Indicate the type of lease Jay has entered into and why (include
a list of the Capital Lease Criteria)
(Present Value & Future Value Tables are provided on pages 3
and 4)
2. Prepare the journal entries on Jay’s books related to the lease
agreement for the following dates: (round all amounts to the
nearest dollar. Include a partial amortization schedule)
a. January 1, 2020
b. December 31, 2020
c. January 1, 2021
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment....
Jay Company, as lessee, enters into a lease agreement on January
1, 2020, to lease equipment. The following data are relevant to the
lease agreement.
- The term of the noncancellable lease is three years, with no
renewal option. Payments of $12,000 are due on January 1, of each
year.
- The fair value of the equipment on January 1, 2020 is $35,000.
The equipment has an estimated economic life of five years, and an
unguarenteed residual value of $4,000....
Falwell Company, as lessee, enters into a lease agreement on January 1, 2018, for equipment. The...
Falwell Company, as lessee, enters
into a lease agreement on January 1, 2018, for equipment. The
following data are relevant to the lease agreement:
1. The term of
the noncancelable lease is 4 years. Payments of $4,892 are due on
January 1 of each year.
2. The fair
value of the equipment on January 1, 2018 is $25,000 and the book
value is 20,000. The equipment has an economic life of 6 years.
Both parties expect the equipment to have an unguaranteed...
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Zest Company, as lessee, enters into a lease agreement on January
1, 2018, to
lease equipment. The following data are relevant to the lease
agreement.
- The term of the noncancellable lease is three years, with no
renewal option.
- The fair value of the equipment on January 1, 2018 is $60,000.
The
estimated residual value is $0.
- The equipment reverts back to the lessor at the termination of
the lease.
- The lessor used...
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July 1, 2021, for equipment. The following data are relevant to the
lease agreement:
1.
The term of the noncancelable lease is 4 years, with
no renewal option. Payments of $855,212 are due on
July 1 of each year.
2.
The fair value of the equipment on July 1, 2021 is $3,020,000.
The equipment has an economic life of 6 years with
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The term of the noncancelable lease is 10 years, with no
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Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance...
Lessee enters into a three-year lease of equipment and concludes
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(also three years). In addition, Lessee pays initial direct costs
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value of the equipment at the end of the lease term, has concluded
that it is probable that Lessee will owe $6,000 to Lessor as...
Lessee enters into a three-year lease of equipment and concludes that the agreement is a finance...
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that the agreement is a finance lease because the lease term is for
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value of the equipment at the end of the lease term, has concluded
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commencement and annually...
Lessee enters into a four-year lease of equipment and concludes that the agreement is a finance...
Lessee enters into a four-year lease of equipment and concludes
that the agreement is a finance lease because the lease contains an
option for Lessee to purchase the equipment at the end of the lease
and the Lessee is reasonably certain to exercise that option. The
arrangement provides the following:
Lease term
Four years, with the first payment due
at lease commencement and the remainder annually at the lease
anniversary date thereafter
Annual payments, beginning at lease
commencement and annually...
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