Question: Assume the same information in Exercise 17-57 except that the lessee also paid legal fees in the execution of the lease of ($ 1,800) on

Assume the same information in Exercise 17-57 except that the lessee also paid legal fees in the execution of the lease of $\$ 1,800$ on January $1,2020$.

Required

a. How would Abel Company classify the lease?

b. Prepare an amortization schedule of the lease liability.

c. Prepare the entries for Abel Company for 2020.

Exercise 17-57

On January 1, 2020, Alex Company signed a 5-year lease contract for equipment with Abel Company. The equipment had a normal selling price of $\$ 55,000$ and an estimated useful life of 6 years. Five annual payments of $\$ 11,815$ are payable by Abel on January 1 , beginning in 2020 . The asset reverts to Alex at the end of the lease term, December 31,2022 , and is estimated to have an unguaranteed residual value on that date of $\$ 3,000$. Alex's implicit interest rate is $6 \%$, which is known to Abel.

Step by Step Solution

★★★★★

3.41 Rating (151 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Intermediate Accounting Volume 2 Questions!

Question 1 : Consider the following country, Bacchus. In 2 0 2 2 , the citizens of Bacchus produce and consume the following items in the given quantities. Calculate the Market Value of each item and...

make a business email that is three-fourths- to one-page long. Each December, the members of your work department attend a holiday luncheon. You have been asked to make the luncheon plans and share...

On January 1, 2020, Alex Company signed a 5-year lease contract for equipment with Abel Company. The equipment had a normal selling price of $\$ 55,000$ and an estimated useful life of 6 years....

List all the characteristics of contour lines.

Question 11 Not complete Marked out of 6.67 \\ Flag question Identifying Lease Payments For each of the following five separate finance lease scenarios, determine the lease payment used to assess...

Identifying Lease Payments For each of the following four separate finance leases scenarios, determine the lease payment that the lessee should use to determine the appropriate lease classification....

eBook . Videos & Prin Question 13 Not complete Marked out of 6.67 \\ Flag question Recording Finance Lease Journal Entries- Purchase Option Lessee Company enters into a 6-year finance lease of...

5. Pennington Ltd enters into lease agreement for an initial two-year period plus an option for an additional three years. The agreement was executed on January 1, 2019. At the outset of the lease...

Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $55,539 to be paid at the beginning...

question c and d only QUESTIONS C AND D ONLY Reporting Finance Lease, Guaranteed Residual-Lessee On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual...

Windsor Industries and Sheridan Inc. enter into an agreement that requires Sheridan Inc. to build three diesel-electric engines to Windsor's specifications. Upon completion of the engines, Windsor...

JIT production, relevant benefits, relevant costs. The Champion Hardware Company manufactures specialty brass door handles at its Lynchburg plant Champion is considering implementing a JIT production...

A 71.2-g sample of oxalic acid, H2C2O4, was dissolved in 1.00 L of solution. How would you prepare 1.00 L of 0.150 M H2C2O4 from this solution?

An improper significance test. A friend has performed a significance test of the null hypothesis that two means are equal. His report states that the null hypothesis is rejected in favor of the...

Why must income taxation be taken into account in designing a reward system? What are the alternative tax treatments of the various compensation alternatives? LO1

Financial reporting distinguishes equity into two broad components: contributed capital and accumulated income; the latter is further separated into retained earnings and accumulated other...

Which of the following transactions have the potential to directly affect the retained earnings portion of equity? Exclude indirect effects such as the transfer of income into retained earnings at...

For accounting purposes, of the following characteristics, which distinguish a common share from a preferred share? Explain your answer briefly. The share has no par value. The share has voting...

The cash receipt for each month as follows: Month 1 Month 2 Month 3 Month 4 $ 4,000 6,000 5,000 7,000 22,000 Total sales Purchases Month 1 Month 2 $ 6,000 6,000 4,000 5,000 21,000 Month 3 Month 4...

Question C2 (20 marks) (a) Virtual Teach Limited has just paid a dividend of $1.50 per share. The company is expected to have a strong growth of 12% per annum for the next two years. However, after...

Friendly Candy Compary is a wholesale distributor of Candy. Small but steady growth in sales has been achieved by Friendly Candy Company over the past few years whila Candy prices have bien...