Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The following data are relevant to the lease agreement: The term of the noncancelable lease is 3 years, with no renewal option. Payments of $784,100 are due on July 1 of each 1. year. 2. The fair value of the equipment on July 1, 2014 is $2,163,418. The equipment has an economic life of 6 years with no salvage value. 3. Eubank depreciates similar machinery it owns on the sum-of-the-years'-digits basis. The lessee pays all executory costs. 5. Eubank's incremental borrowing rate is 11% per year. The lessee is aware that the lessor used an implicit rate of 9% in computing the lease payments (present value factor for 3 periods at 9%, 2.75911; at 11%, 2.71252. 4. TABLE 6-5 PRESENT VALUE OF AN ANNUITY DUE OF 1 n) Periods 8% 9% 10% 11% 12% 15% 1.00000 1.00000 1.86957 1.00000 1.00000 1.91743 2.75911 3.53130 4.23972 1.00000 1.90090 1.00000 1.92583 1.90909 1.89286 2 2.78326 3.57710 4,31213 2.73554 3.48685 2.71252 3.44371 4.10245 2.69005 3.40183 2.82571 3.28323 3.85498 3 4 4.10986 4.03735 4.99271 4.88965 4.79079 4.35216 4.69590 5.23054 4.60478 5.82288 5.48592 5.35526 5.86842 5.11141 5.58376 5.96764 4.78448 6.20637 6.74064 7.24689 6.03295 6.53482 5.71220 5.16042 6.33493 6.14612 6.53705 5.48732 9 6.99525 6.75902 6.32825 5.77158 10 6.88923 7.20652 7.49236 7.71008 7.41766 7.14457 6.85022 6.01877 11 8.13896 8.53608 8.90378 9.24424 7.80519 8.16073 7.49506 7.81369 6.23371 6.42002 6.93770 12 13 8.48000 8.78615 7.19437 7.42355 7.62817 8.10336 7.74967 6.58315 6.72448 14 8.30009 7.98187 15 9.0000 9.31258 8.19087 9.55946 9.85137 10.12164 10.37169 8.60008 8.82371 7.81086 6.84737 6.95424 16 17 8.37916 7.97399 9.54363 9.75583 9.02155 9.20141 8.54879 8.70102 8.11963 8.24967 7.04716 7.12797 18 19 10.60300 9.95012 9.36492 6.83929 8.30578 7.19823 20 10.81815 11.01680 10.12655 10.29224 9.51356 9.64809 6.96333 9.07507 7.25933 7.31246 8.40944 21 8.50200 22 8.64465 8.71843 11.20074 10.44243 9.77154 9.17574 7.35868 23 11.37106. 11.52676 10.58021 7.39884 7.43377 9.88322 9.20643 10.70661 9.98474 9.34814 8.78432 25 11.67478 11.80996 11.93518 10.82258 10.07704 9.42174 8.84314 7.46415 26 10.92897 11.02058 9.48806 9.54780 27 28 10.16095 8.89566 8.94255 7.49056 7.51359 10.23722 8.98442 9.02181 7.53351 7.55068 12.05106 11.11613 11.19828 10.30657 9.60162 29 12.16841 10.36901 9.65011 30 12.25778 9.05518 11.27365 11.34280 11.40624 10.42001 9.60379 7.56598 31 12.34960 10.47901 9.73315 9.08499 7.57911 32 7.59053 7.60040 7.60910 12.43500 10.52638 9.76800 9.80054 9.11159 33 9.13535 9.15656 12.51389 11.46444 10.50943 34 12.58093 11.51784 10.60858 9.82932 12.65457 12.71719 12.77518 11.56682 10.64416 9.85524 9.17550 7.61661 11.61176 11.65299 11.09082 11.72552 9.87859 9.89963 7.62314 7.82882 7.63375 10.67051 9.19241 10.70592 9.20751 12.82687 10.73266 9.91859 9.22099 12.87858 10.75097 9.93567 9.23303 7.63805 Indicate the type of lease Eubank Company has entered into and what accounting treatment is applicable. Prepare the journal entries on Eubank's books that relate to the lease agreement for the following dates: (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,250.) 1. July 1, 2014. 2. December 31, 2014. 3. July 1, 2015. 4. December 31, 2015. Date Account Titles and Explanation Debit Credit July 1, 2014 Dec. 31, 2014 Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The following data are relevant to the lease agreement: The term of the noncancelable lease is 3 years, with no renewal option. Payments of $784,100 are due on July 1 of each 1. year. 2. The fair value of the equipment on July 1, 2014 is $2,163,418. The equipment has an economic life of 6 years with no salvage value. 3. Eubank depreciates similar machinery it owns on the sum-of-the-years'-digits basis. The lessee pays all executory costs. 5. Eubank's incremental borrowing rate is 11% per year. The lessee is aware that the lessor used an implicit rate of 9% in computing the lease payments (present value factor for 3 periods at 9%, 2.75911; at 11%, 2.71252. 4. TABLE 6-5 PRESENT VALUE OF AN ANNUITY DUE OF 1 n) Periods 8% 9% 10% 11% 12% 15% 1.00000 1.00000 1.86957 1.00000 1.00000 1.91743 2.75911 3.53130 4.23972 1.00000 1.90090 1.00000 1.92583 1.90909 1.89286 2 2.78326 3.57710 4,31213 2.73554 3.48685 2.71252 3.44371 4.10245 2.69005 3.40183 2.82571 3.28323 3.85498 3 4 4.10986 4.03735 4.99271 4.88965 4.79079 4.35216 4.69590 5.23054 4.60478 5.82288 5.48592 5.35526 5.86842 5.11141 5.58376 5.96764 4.78448 6.20637 6.74064 7.24689 6.03295 6.53482 5.71220 5.16042 6.33493 6.14612 6.53705 5.48732 9 6.99525 6.75902 6.32825 5.77158 10 6.88923 7.20652 7.49236 7.71008 7.41766 7.14457 6.85022 6.01877 11 8.13896 8.53608 8.90378 9.24424 7.80519 8.16073 7.49506 7.81369 6.23371 6.42002 6.93770 12 13 8.48000 8.78615 7.19437 7.42355 7.62817 8.10336 7.74967 6.58315 6.72448 14 8.30009 7.98187 15 9.0000 9.31258 8.19087 9.55946 9.85137 10.12164 10.37169 8.60008 8.82371 7.81086 6.84737 6.95424 16 17 8.37916 7.97399 9.54363 9.75583 9.02155 9.20141 8.54879 8.70102 8.11963 8.24967 7.04716 7.12797 18 19 10.60300 9.95012 9.36492 6.83929 8.30578 7.19823 20 10.81815 11.01680 10.12655 10.29224 9.51356 9.64809 6.96333 9.07507 7.25933 7.31246 8.40944 21 8.50200 22 8.64465 8.71843 11.20074 10.44243 9.77154 9.17574 7.35868 23 11.37106. 11.52676 10.58021 7.39884 7.43377 9.88322 9.20643 10.70661 9.98474 9.34814 8.78432 25 11.67478 11.80996 11.93518 10.82258 10.07704 9.42174 8.84314 7.46415 26 10.92897 11.02058 9.48806 9.54780 27 28 10.16095 8.89566 8.94255 7.49056 7.51359 10.23722 8.98442 9.02181 7.53351 7.55068 12.05106 11.11613 11.19828 10.30657 9.60162 29 12.16841 10.36901 9.65011 30 12.25778 9.05518 11.27365 11.34280 11.40624 10.42001 9.60379 7.56598 31 12.34960 10.47901 9.73315 9.08499 7.57911 32 7.59053 7.60040 7.60910 12.43500 10.52638 9.76800 9.80054 9.11159 33 9.13535 9.15656 12.51389 11.46444 10.50943 34 12.58093 11.51784 10.60858 9.82932 12.65457 12.71719 12.77518 11.56682 10.64416 9.85524 9.17550 7.61661 11.61176 11.65299 11.09082 11.72552 9.87859 9.89963 7.62314 7.82882 7.63375 10.67051 9.19241 10.70592 9.20751 12.82687 10.73266 9.91859 9.22099 12.87858 10.75097 9.93567 9.23303 7.63805 Indicate the type of lease Eubank Company has entered into and what accounting treatment is applicable. Prepare the journal entries on Eubank's books that relate to the lease agreement for the following dates: (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,250.) 1. July 1, 2014. 2. December 31, 2014. 3. July 1, 2015. 4. December 31, 2015. Date Account Titles and Explanation Debit Credit July 1, 2014 Dec. 31, 2014
Expert Answer:
Answer rating: 100% (QA)
Solution 1 Capital Lease Method Note Capitalised Amount Lease Payment PVA113 Capitalised Amount 7841... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
Students also viewed these accounting questions
-
Lessor and Lessee enter into a seven-year lease for a small office building. The contract designates in addition to rental payments to the Lessor, the Lessee is required to pay real estate taxes and...
-
The lessor is computing the appropriate monthly lease payment. The fair value of the leased asset is $75,000. The guaranteed residual value at the end of the lease term is $12,000. The appropriate...
-
The lessor is computing the appropriate monthly lease payment. The fair value of the leased asset is $50,000. The guaranteed residual value at the end of the lease term is $8,000. The appropriate...
-
Advertising plays a major role in the ______________ stage of the product life cycle, and_______________ plays a major role in the maturity stage.
-
With reference to Exercise 11.2 (a) Evaluate s2; (b) Construct a 95% confidence interval for a; (c) Construct a 95% confidence interval for 0.
-
Describe four decisions for which ABC information is useful.
-
Hemlock Semiconductor Operations, LLC, and SolarWorld Industries Sachsen GmbH, are both companies involved in the manufacture of components for solar power products. Prior to the lawsuit, the two...
-
Multiple Choice. Choose the best answer. 1. The FASBs objectives of financial reporting for not-for-profit organizations include all of the following except: a. Making resource allocation decisions....
-
DATABASE SYSTEMS What is a key and how is it important in a relational model?
-
Scenario: Mayo Clinic, a non-profit provider of health care and whose motto is the needs of the patient come first, pays doctors a salary rather than a fee for service. Dr. John C. Lewin, chief...
-
1. What is the difference between an accounts payable and a notes payable? Explain 2. How does goodwill arise? How is it accounted for and reported on the financial statements? 3. The following...
-
You own an investment portfolio as follows: Company Unit owned Price per share Expected return (per annum) X 1,000 RM5 8 percent Y 1,500 RM2 12 percent Calculate your expected return on the...
-
The following piece of news appeared on the Financial Times news feed on Friday 26th March 2021, 10.34am. "Metals manufacturer Worthington Industries (WI) announced the start of contacts with the...
-
You have new clients who are married, Victor and Jessica Parker. They came to your office today and provided you with the following information for the year: Victor annual gross income = $75,000...
-
INSTRUCTIONS: (a) Using the data above, compute pension expense for the year 2019 by preparing a pension worksheet. (b) Prepare the journal entry for pension expenses for 2019. (c) Compute the net...
-
The owner of a small bookstore in NYC is considering a sale. The bookstore beta is 0.87. R2 across bookstores in 0.45. What is the total beta for the bookstore owner?
-
5. As indicated in the chapter and highlighted in the chapter interview, the bond market is huge, yet bond prices are rarely accessible in the printed press and online quotes are available only...
-
Explain how the graph of each function can be obtained from the graph of y = 1/x or y = 1/x 2 . Then graph f and give the (a) Domain (b) Range. Determine the largest open intervals of the domain over...
-
On January 1, 2011, Lily Company purchased a building for $1,000,000. The company made a 25% down payment and took out a mortgage payable over 30 years with monthly payments of $5,503.23. The first...
-
Von Surf Co. issued $1,200,000 of convertible 10-year debentures on July 1, 2010. The debentures provide for 8% interest payable semiannually on January 1 and July 1. The discount in connection with...
-
Under the November 2007 Preliminary Views document issued by the FASB, how would employee stock options be classified in the balance sheet?
-
Explain two ways a fixed-for-fixed currency swap can be valued.
-
Explain the difference between the credit risk and the market risk in a swap.
-
The time-series graph in Figure 24 depicts the number of residents in the United States living in poverty. Why might this graph be considered misrepresentative? Approach Look for any characteristics...
Study smarter with the SolutionInn App