1234 5 15 points Question 9 On January 1, 2020, Adliya Company signs a 4-year lease...
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1234 5 15 points Question 9 On January 1, 2020, Adliya Company signs a 4-year lease contract to lease an equipment from Gulf Company. The lease agreement is non-renewable and non cancelable According to the agreement, the lessee is required to make annual rental payment of $480,000 beginning from January 1, 2020 The lease contains the following provisions 1. The estimated economic life of the equipment is 5 years. 2 At the inception of the lease, the fair value of the equipment is $1,680,000. 3. Each annual rental payment includes $28,975.44 of executory costs relating to property taxes 4. The lessee's incremental borrowing rate is 10%. The lessor's implicit rate in 8% and is known to the lessee 5 At the end of the lease term, the equipment will revert to the lessor, and at that time the equipment is expected to have unguaranteed residual value of 596,000. 6. Both, Adliya Company and Gulf Company, use the straight-line method for depreciation. Additional information: The present value of an Ordinary Annuity of $1 and the present value of an Annuity Due of $1 for 5 periods at 8%, 9% and 10% are as follows The present value of an Annuity Due of $1 Period 9% 8% 1.00000 1.92593 2.78326 3.57710 4.31221 1.00000 1.91743 2.75911 3.53129 4.23972 10% 1.00000 1.90909 2.73554 3.48685 416987 The present value of an Annuity Due of $1 Period 99 1 3 5 8% 1.00000 afstand the present value of an Anmity Due of $1 ir 3 periods at 8% 9% and 10% 1.92593 2.78320 3.57710 4.31221 1.00000 1.91743 2.75911 3.53129 4.23972 10% 1,00000 1.90909 2.73554 3.48685 4.16987 Instructions: A What is the type of this lease to Adliya Company? Explain why 8 Prepare an amortization schedule through the years 2021 and 2022 that would be suitable for the lesse C Prepare the necessary journal entries in the books of Adliya Company during 2020, and January 1, 2021, to reflect the lease agreement, the lease payments and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31 For the toolbar, press ALT+F10 (PC) or ALTHEN F10 (Mac). BIVS Paragraph Arial V 10pt E AS2 T. X 956 *** Que Completion Statu QUESTION The teme Company manfactures fready, good looking, moderately priced andrelles. The following data are for the year ended December 31, 2020 Beginning inventory, January 1, 2020 Ending inventory, December 31, 2020 1 2020 Sales Selling price Variable manufacturing est per unit, including direct materials Variable selling & admin, cost per united Fixed manufacturing costs Fixed selling & admin. cons 100,000 10,000 wit 400,000 $25 per unit 56 per unit $2 per unit sold $1.625,000 $1.100,000 Required: Assume standard costs per unit are the same for units in beginning inventory and units produced during the year. Also, assume no price, spending, or efficiency variances Prepare income statement under variable.costing for the year ended December 31, 2020. 1234 5 15 points Question 9 On January 1, 2020, Adliya Company signs a 4-year lease contract to lease an equipment from Gulf Company. The lease agreement is non-renewable and non cancelable According to the agreement, the lessee is required to make annual rental payment of $480,000 beginning from January 1, 2020 The lease contains the following provisions 1. The estimated economic life of the equipment is 5 years. 2 At the inception of the lease, the fair value of the equipment is $1,680,000. 3. Each annual rental payment includes $28,975.44 of executory costs relating to property taxes 4. The lessee's incremental borrowing rate is 10%. The lessor's implicit rate in 8% and is known to the lessee 5 At the end of the lease term, the equipment will revert to the lessor, and at that time the equipment is expected to have unguaranteed residual value of 596,000. 6. Both, Adliya Company and Gulf Company, use the straight-line method for depreciation. Additional information: The present value of an Ordinary Annuity of $1 and the present value of an Annuity Due of $1 for 5 periods at 8%, 9% and 10% are as follows The present value of an Annuity Due of $1 Period 9% 8% 1.00000 1.92593 2.78326 3.57710 4.31221 1.00000 1.91743 2.75911 3.53129 4.23972 10% 1.00000 1.90909 2.73554 3.48685 416987 The present value of an Annuity Due of $1 Period 99 1 3 5 8% 1.00000 afstand the present value of an Anmity Due of $1 ir 3 periods at 8% 9% and 10% 1.92593 2.78320 3.57710 4.31221 1.00000 1.91743 2.75911 3.53129 4.23972 10% 1,00000 1.90909 2.73554 3.48685 4.16987 Instructions: A What is the type of this lease to Adliya Company? Explain why 8 Prepare an amortization schedule through the years 2021 and 2022 that would be suitable for the lesse C Prepare the necessary journal entries in the books of Adliya Company during 2020, and January 1, 2021, to reflect the lease agreement, the lease payments and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31 For the toolbar, press ALT+F10 (PC) or ALTHEN F10 (Mac). BIVS Paragraph Arial V 10pt E AS2 T. X 956 *** Que Completion Statu QUESTION The teme Company manfactures fready, good looking, moderately priced andrelles. The following data are for the year ended December 31, 2020 Beginning inventory, January 1, 2020 Ending inventory, December 31, 2020 1 2020 Sales Selling price Variable manufacturing est per unit, including direct materials Variable selling & admin, cost per united Fixed manufacturing costs Fixed selling & admin. cons 100,000 10,000 wit 400,000 $25 per unit 56 per unit $2 per unit sold $1.625,000 $1.100,000 Required: Assume standard costs per unit are the same for units in beginning inventory and units produced during the year. Also, assume no price, spending, or efficiency variances Prepare income statement under variable.costing for the year ended December 31, 2020.
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Related Book For
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
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