On 1/1/17, a lessee (tenant) signed a noncancellable net lease with a lessor to use the...
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On 1/1/17, a lessee (tenant) signed a noncancellable net lease with a lessor to use the lessor's equipment. The following data pertain to this lease: Lease term is 3 years. Annual lease payments = $1,000 each, payable 1/1/17, 12/31/17, 12/31/18. Estimated economic useful life of the leased equipment is 4 years. Estimated residual value of the equipment on 12/31/19 = $500. Executory costs = $100 for taxes, paid with each lease payment. Fair value of leased equipment at the inception of the lease = $2,900. Lessee has an option to purchase the equipment on 12/31/19 for $100. Lessee's incremental borrowing rate is 9%. Lessor's implicit interest rate in the lease is 10% and is known to the lessee. The leased equipment has no alternative use to the lessor at the end of the lease term. Additional data: (round all numerical answers to the nearest whole dollar) 3 periods 0.7513 4 periods 0.6830 0.7722 0.7084 Present value (PV) of 1 at 10% PV of 1 at 9% PV of an annuity due of 1 at 10% PV of an annuity due of 1 at 9% 2.7355 2.7591 3.4866 3.5313 PV of an ordinary annuity of 1 at 10% 2.4869 PV of an ordinary annuity of 1 at 9% 2.5313 Required: Answer question #'s 83 through 91, which follow, using the above data: 3.1699 3.2397 83. What is the amount of the present value of lease payments used in the lease classification test? 84. According to ASC Topic 842, how should the lessee classify this lease? 85. What is the reasoning for this lease classification? 86. What is the amount of the present value of the lease payments used in determining the lessee's lease liability at the commencement of the lease? 87. Prepare an amortization table for the lease liability/principal using the effective interest method. 88. Prepare a lease expense schedule for the lease as appropriate. 89. Prepare the lessee's journal entries at the inception of the lease (1/1/17). 90. Prepare the lessee's journal entries during the lease (12/31/17 and 12/31/18). 91. Prepare the lessee's journal entries at the end of the lease (12/31/19). On 1/1/17, a lessee (tenant) signed a noncancellable net lease with a lessor to use the lessor's equipment. The following data pertain to this lease: Lease term is 3 years. Annual lease payments = $1,000 each, payable 1/1/17, 12/31/17, 12/31/18. Estimated economic useful life of the leased equipment is 4 years. Estimated residual value of the equipment on 12/31/19 = $500. Executory costs = $100 for taxes, paid with each lease payment. Fair value of leased equipment at the inception of the lease = $2,900. Lessee has an option to purchase the equipment on 12/31/19 for $100. Lessee's incremental borrowing rate is 9%. Lessor's implicit interest rate in the lease is 10% and is known to the lessee. The leased equipment has no alternative use to the lessor at the end of the lease term. Additional data: (round all numerical answers to the nearest whole dollar) 3 periods 0.7513 4 periods 0.6830 0.7722 0.7084 Present value (PV) of 1 at 10% PV of 1 at 9% PV of an annuity due of 1 at 10% PV of an annuity due of 1 at 9% 2.7355 2.7591 3.4866 3.5313 PV of an ordinary annuity of 1 at 10% 2.4869 PV of an ordinary annuity of 1 at 9% 2.5313 Required: Answer question #'s 83 through 91, which follow, using the above data: 3.1699 3.2397 83. What is the amount of the present value of lease payments used in the lease classification test? 84. According to ASC Topic 842, how should the lessee classify this lease? 85. What is the reasoning for this lease classification? 86. What is the amount of the present value of the lease payments used in determining the lessee's lease liability at the commencement of the lease? 87. Prepare an amortization table for the lease liability/principal using the effective interest method. 88. Prepare a lease expense schedule for the lease as appropriate. 89. Prepare the lessee's journal entries at the inception of the lease (1/1/17). 90. Prepare the lessee's journal entries during the lease (12/31/17 and 12/31/18). 91. Prepare the lessee's journal entries at the end of the lease (12/31/19).
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83 The amount of the present value of lease payments used in the lease classification test is the total present value of the lease payments over the l... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
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