At the end of the December 31, 2019 fiscal year, Sheridan Trucking Corporation, which follows IFRS...

 

 

 

  

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At the end of the December 31, 2019 fiscal year, Sheridan Trucking Corporation, which follows IFRS 16, negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company's specifications on land owned by the company. On January 1, 2020, Sheridan Trucking Corporation took possession of the leased properties and made a cash payment of $1,092,750. Although the useful life of each terminal is 40 years, the non-cancellable lease runs for 20 years from January 1, 2020, with a purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2020, through December 31, 2039. Advance rental payments of $940,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $296,000 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1,030,500 on December 31, 2039, although their fair value at that time is estimated at $2,911,000. At the end of 40 years, the terminals and facilities will have no remaining value. Sheridan Trucking must also make annual payments on January 1 of each year to the lessor of $128,400 for property taxes and $24,350 for insurance. The lease was negotiated to assure the lessor a 8% rate of return. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using time value of money tables, a financial calculator, or Excel functions, calculate for Sheridan Trucking Corporation the amount that it should capitalize on January 1, 2020. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Present value of first 10 payments Present value of last 10 payments Present value of bargain purchase option Discounted present value of terminal facilities and related obligation Assuming a capitalized value of terminal facilities at January 1, 2020 of $8,000,000, prepare journal entries for Sheridan Trucking Corporation to record the following: 1. The signing of the lease 2. The cash payment to the lessor on January 1, 2020 3. Depreciation of the cost of the properties for 2020 using the straight-line method 4. The accrual of interest expense at December 31, 2020, and any other adjusting journal entries concerning the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1. and 2. (To record inception of lease and first lease payment.) (To record depreciation expense.) 4(1). (To record interest.) 4(2). 3. What amounts would appear on Sheridan's December 31, 2020 balance sheet for the leased asset and the related liabilities under the lease arrangement described in part (b)? Sheridan Trucking Corporation Statement of Financial Position - Partial Assuming a capitalized value of terminal facilities at January 1, 2020, of $8,000,000, prepare journal entries for Sheridan Trucking Corporation to record the following by assuming that Sheridan follows ASPE. 1. The signing of the lease 2. The cash payment to the lessor on January 1, 2020 3. Depreciation of the cost of the properties for 2020 using the straight-line method 4. The accrual of interest expense at December 31, 2020, and any other adjusting journal entries concerning the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1. Jan. 1, 2020 2. 3. 4. (To record the adjusting journal entry) What amounts would appear on Sheridan's December 31, 2020 balance sheet for the leased asset and the related liabilities under the lease arrangement described in part (b)? Assume that Sheridan follows ASPE. Sheridan Trucking Corporation Statement of Financial Position - Partial At the end of the December 31, 2019 fiscal year, Sheridan Trucking Corporation, which follows IFRS 16, negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the company's specifications on land owned by the company. On January 1, 2020, Sheridan Trucking Corporation took possession of the leased properties and made a cash payment of $1,092,750. Although the useful life of each terminal is 40 years, the non-cancellable lease runs for 20 years from January 1, 2020, with a purchase option available upon expiration of the lease. The 20-year lease is effective for the period January 1, 2020, through December 31, 2039. Advance rental payments of $940,000 are payable to the lessor on January 1 of each of the first 10 years of the lease term. Advance rental payments of $296,000 are due on January 1 for each of the last 10 years of the lease. The company has an option to purchase all of these leased facilities for $1,030,500 on December 31, 2039, although their fair value at that time is estimated at $2,911,000. At the end of 40 years, the terminals and facilities will have no remaining value. Sheridan Trucking must also make annual payments on January 1 of each year to the lessor of $128,400 for property taxes and $24,350 for insurance. The lease was negotiated to assure the lessor a 8% rate of return. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using time value of money tables, a financial calculator, or Excel functions, calculate for Sheridan Trucking Corporation the amount that it should capitalize on January 1, 2020. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Present value of first 10 payments Present value of last 10 payments Present value of bargain purchase option Discounted present value of terminal facilities and related obligation Assuming a capitalized value of terminal facilities at January 1, 2020 of $8,000,000, prepare journal entries for Sheridan Trucking Corporation to record the following: 1. The signing of the lease 2. The cash payment to the lessor on January 1, 2020 3. Depreciation of the cost of the properties for 2020 using the straight-line method 4. The accrual of interest expense at December 31, 2020, and any other adjusting journal entries concerning the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1. and 2. (To record inception of lease and first lease payment.) (To record depreciation expense.) 4(1). (To record interest.) 4(2). 3. What amounts would appear on Sheridan's December 31, 2020 balance sheet for the leased asset and the related liabilities under the lease arrangement described in part (b)? Sheridan Trucking Corporation Statement of Financial Position - Partial Assuming a capitalized value of terminal facilities at January 1, 2020, of $8,000,000, prepare journal entries for Sheridan Trucking Corporation to record the following by assuming that Sheridan follows ASPE. 1. The signing of the lease 2. The cash payment to the lessor on January 1, 2020 3. Depreciation of the cost of the properties for 2020 using the straight-line method 4. The accrual of interest expense at December 31, 2020, and any other adjusting journal entries concerning the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1. Jan. 1, 2020 2. 3. 4. (To record the adjusting journal entry) What amounts would appear on Sheridan's December 31, 2020 balance sheet for the leased asset and the related liabilities under the lease arrangement described in part (b)? Assume that Sheridan follows ASPE. Sheridan Trucking Corporation Statement of Financial Position - Partial

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