Question
In: Accounting
What are the answers? Royals Incorporated leases a piece of equipment to Polar Corporation on January...
What are the answers? Royals Incorporated leases a piece of equipment to Polar Corporation on January 1, 2017. The lease agreement called for annual rental payments of $8,648 at the beginning of each year of the 3-year lease. The equipment has a fair value of $35,000, a book value of $20,000, and an economic useful life of 5 years after which the residual value will be zero. Both parties expect a residual value of $12,500 at the end of the lease term, though this amount is not guaranteed. Royals set the lease payments with the intent of earning a 6% return, and Polar is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. PV Annuity Due PV Ordinary Annuity PV Single Sum 6%, 3 periods 2.83339 2.67301 .83962 6%, 5 periods 4.46511 4.21236 .74726 (
a) Describe the nature of the lease to Polar.
(b) Prepare all necessary journal entries for Polar in 2017.
(c)Show how the rental payment is determined by lessor (show your works).
(d)Suppose that the residual value is guaranteed by Polar. All other facts being equal, how would Royals change the amount of the annual rental payment?
Solutions
ekkarill92 answered 11 months agoRelated Solutions
Royals Incorporated leases a piece of equipment to Polar Corporation on January 1, 2020. The lease...
Royals Incorporated leases a piece of equipment to
Polar Corporation on January 1, 2020. The lease agreement called
for annual rental payments of $8,648 at the beginning of each year
of the 3-year lease. The equipment has a fair value of $35,000, a
book value of $20,000, and an economic useful life of 5 years after
which the residual value will be zero. Both parties expect a
residual value of $12,500 at the end of the lease term, though this...
Royals Incorporated leases a piece of equipment to Polar Corporation on January 1, 2020. The lease...
Royals Incorporated leases a piece of equipment to Polar
Corporation on January 1, 2020. The lease agreement called for
annual rental payments of $8,648 at the beginning of each year of
the 3-year lease. The equipment has a fair value of $35,000, a book
value of $20,000, and an economic useful life of 5 years after
which the residual value will be zero. Both parties expect a
residual value of $12,500 at the end of the lease term, though this...
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Pina Incorporated leases a piece of equipment to Kingbird
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Assume accounting periods ends December 31.
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(Accounting for an Operating Lease) Rauch Incorporated leases a piece of equipment to Donahue Corporation on...
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Rauch Incorporated leases a piece of equipment to Donahue
Corporation on January 1, 2017. The lease agreement called for
annual rental payments of $4,892 at the beginning of each year of
the 4-year lease. The equipment has an economic useful life of 6
years, a fair value of $25,000, a book value of $20,000, and both
parties expect a residual value of $8,250 at the end of the lease
term, though this amount is not...
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Exercise 21-22 a-b (Part Level Submission) Rauch Incorporated leases a piece of equipment to Donahue Corporation...
Exercise 21-22 a-b (Part Level Submission)
Rauch Incorporated leases a piece of equipment to Donahue
Corporation on January 1, 2020. The lease agreement called for
annual rental payments of $4,892 at the beginning of each year of
the 4-year lease. The equipment has an economic useful life of 6
years, a fair value of $25,000, a book value of $20,000, and both
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term, though this amount is...
Blossom Incorporated leases a piece of machinery to Pina Company on January 1, 2020, under the...
Blossom Incorporated leases a piece of machinery to Pina Company
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1.
The lease is to be for 4 years with rental payments of $15,557
to be made at the beginning of each year.
2.
The machinery’ has a fair value of $81,480, a book value of
$60,800, and an economic life of 10 years.
3.
At the end of the lease term, both parties expect the machinery
to have a residual value...
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