Question

In: Accounting

On January 1, 2018, Worchester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased...

On January 1, 2018, Worchester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased the equipment from Wellesley Harvester at a cost of $999,738. Worchester borrowing rate for similar transactions is 10%.

The lease agreement specified four annual payments of $197,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 thereafter through 2020. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $686,910.

On January 1, 2020 (after two years and three payments), the Worchester and Newton agreed to extend the lease term by two years. The market rate of interest at that time was 9%.

Required:

1. Prepare the appropriate entries for Worchester Construction on January 1, 2020, to adjust its lease liability for the lease modification.
2. Prepare all appropriate entries for Newton LeaseCorp on January 1, 2020, to record the lease modification.
3. Prepare all appropriate entries for Worchester Construction on December 31, 2020, related to the lease.
4. Prepare all appropriate entries for on December 31, 2020, related to the lease.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

The Bobo Company leased equipment from Bolinger Industries on January 1, 2018. Bolinger purchased the equipment...
The Bobo Company leased equipment from Bolinger Industries on January 1, 2018. Bolinger purchased the equipment at a cost of $270,000. Other information: Lease term 3 years Annual payments $120,000 beginning Jan. 1, 2018 Life of asset 3 years Implicit interest rate 8% Lessee's incremental rate 8% Present value of an ordinary annuity of $1, i = 8, n = 3 2.5771 Present value of an annuity due of $1, i = 8, n = 3 2.7833 Required: Round your...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $96,000. Manufacturers Southern's fiscal year ends December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,500 at the beginning of each period Economic life of asset 2...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $86,000. Manufacturers Southern's fiscal year ends December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $15,000 at the beginning of each period Economic life of asset 2...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured...
Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $104,000. Manufacturers Southern's fiscal year ends December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term2 years (8 quarterly periods) Quarterly rental payments$18,200 at the beginning of each period Economic life of asset2 years Fair value...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $310,000. The chronometers have a fair value of $403,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $22,548 at Jan. 1, 2018, and at...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $130,000. The chronometers have a fair value of $169,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $9,457 at Jan. 1, 2018, and at...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $110,000. The chronometers have a fair value of $143,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $8,003 at Jan. 1, 2018, and at...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers...
Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $330,000. The chronometers have a fair value of $429,000. Appropriate adjusting entries are made quarterly. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 5 years (20 quarterly periods) Quarterly lease payments $24,002 at Jan. 1, 2018, and at...
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the...
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $117,772. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $15,500 at the beginning of each period Economic life of asset 2 years Fair value of asset...
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the...
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $127,650. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $16,800 at the beginning of each period Economic life of asset 2 years Fair value of asset...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT