Ivanhoelnc. leased a new crane to Sarasota Construction under a 5-year, non-cancelable contract starting January 1,...
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Ivanhoelnc. leased a new crane to Sarasota Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $45,500 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $220,000, and a cost to Ivanhoe of $220,000. The estimated fair value of the crane is expected to be $35,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Ivanhoe and Sarasota adjust and close books annually at December 31. Collectibility of the lease payments is probable. Sarasota's incremental borrowing rate is 9%, and Ivanhoe's implicit interest rate of 9% is known to Sarasota. Click here to view factor tables. Identify the type of lease involved and give reasons for your classification. The lease is classified as an operating lease e Textbook and Media Question Part Score --/1 Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Sarasota uses straight-line amortization for all similar leased assets, and Ivanhoe depreciates the asset on a straight-line basis with a salvage value of $15,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date 1/1/20 1/1/20 12/31/20 Account Titles and Explanation Lessee's Entries Leased Asset Lease Liability (To record lease.) Lease Rental Expense (To record lease payment.) (To record interest and amortization expense.) Debit Credit 1/1/20 12/31/20 12/31/20 Lessor's Entries (To record the receipt of payment.) (To record depreciation.) (To record lease revenue.) eTextbook and Media Ivanhoelnc. leased a new crane to Sarasota Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $45,500 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $220,000, and a cost to Ivanhoe of $220,000. The estimated fair value of the crane is expected to be $35,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Ivanhoe and Sarasota adjust and close books annually at December 31. Collectibility of the lease payments is probable. Sarasota's incremental borrowing rate is 9%, and Ivanhoe's implicit interest rate of 9% is known to Sarasota. Click here to view factor tables. Identify the type of lease involved and give reasons for your classification. The lease is classified as an operating lease e Textbook and Media Question Part Score --/1 Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Sarasota uses straight-line amortization for all similar leased assets, and Ivanhoe depreciates the asset on a straight-line basis with a salvage value of $15,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date 1/1/20 1/1/20 12/31/20 Account Titles and Explanation Lessee's Entries Leased Asset Lease Liability (To record lease.) Lease Rental Expense (To record lease payment.) (To record interest and amortization expense.) Debit Credit 1/1/20 12/31/20 12/31/20 Lessor's Entries (To record the receipt of payment.) (To record depreciation.) (To record lease revenue.) eTextbook and Media
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ANSWER The lease is classified as an operating leas... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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