problem 20-4

20-43 Exercises E20-4 10 20.4 Lessee cialize Required: Next Level Examine and evaluate each capitalization criteriaal 7 Calculate the amount of the asset and liability of Sax at the incep capitalization criteria and determine what type of lease this is for Sax. 3. Prepare a table summarizing the lease payments and interest expense lity of Sax at the inception of the lease (round to the nearest dollar). 4. Prepare journal entries for Sax for the years 2019 and 2020. Lessee Accounting for Finance Lease On January 1, 2019, Concord Corp. signs cialized manufacturing equipment from Stone Inc. Concord agrees to on January 1, 2019. Concord Corp. signs a contract to lease nonspt Additional information pertaining to the lease is as follows: Stone Inc. Concord agrees to make lease payments of $47.500 per year 1. The term of the noncancelable lease is 3 years, with a renewal option at are due every January 1, beginning January 1, 2019. and is 3 years, with a renewal option at the end of the lease term. l'ayments The fair value of the manufacturing equipment on January 1, 2019, is S150.00 nomic life of 7 years. S p ment on January 1, 2019, is $150,000. The equipment has an eco 3. Concord guarantees that the equipment will have a residual value of $15,000 at the end of Concord considers it probable that it will have to pay $5.000 cash at the end of the lease terms to residual value guarantee. 4. Concord Corp. depreciates similar assets using the double-declining balance method. 5. Concord's incremental borrowing rate is 12% per year; Stone's implicit interest rate is 10% and known by Concord 6. Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes directly to the applicable third party. Required: Next Level Examine and evaluate the lease classification criteria and determine what type of lease this is for Concord. 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries for Concord for the entire lease penod. Assume that the equipment has a fair value of S11,500 at the end of the 3-year lease term. Comparisons of Operating and Sales-Type Leases On January 1, 2019, Nelson Company leases certain prop crty to Queens Company at an annual rental of So0,000 payable in advance at the beginning of each year for 8 T h i- hen 250 hasan 2. 20-43 Exercises E20-4 10 20.4 Lessee cialize Required: Next Level Examine and evaluate each capitalization criteriaal 7 Calculate the amount of the asset and liability of Sax at the incep capitalization criteria and determine what type of lease this is for Sax. 3. Prepare a table summarizing the lease payments and interest expense lity of Sax at the inception of the lease (round to the nearest dollar). 4. Prepare journal entries for Sax for the years 2019 and 2020. Lessee Accounting for Finance Lease On January 1, 2019, Concord Corp. signs cialized manufacturing equipment from Stone Inc. Concord agrees to on January 1, 2019. Concord Corp. signs a contract to lease nonspt Additional information pertaining to the lease is as follows: Stone Inc. Concord agrees to make lease payments of $47.500 per year 1. The term of the noncancelable lease is 3 years, with a renewal option at are due every January 1, beginning January 1, 2019. and is 3 years, with a renewal option at the end of the lease term. l'ayments The fair value of the manufacturing equipment on January 1, 2019, is S150.00 nomic life of 7 years. S p ment on January 1, 2019, is $150,000. The equipment has an eco 3. Concord guarantees that the equipment will have a residual value of $15,000 at the end of Concord considers it probable that it will have to pay $5.000 cash at the end of the lease terms to residual value guarantee. 4. Concord Corp. depreciates similar assets using the double-declining balance method. 5. Concord's incremental borrowing rate is 12% per year; Stone's implicit interest rate is 10% and known by Concord 6. Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes directly to the applicable third party. Required: Next Level Examine and evaluate the lease classification criteria and determine what type of lease this is for Concord. 2. Prepare a table summarizing the lease payments and interest expense. 3. Prepare journal entries for Concord for the entire lease penod. Assume that the equipment has a fair value of S11,500 at the end of the 3-year lease term. Comparisons of Operating and Sales-Type Leases On January 1, 2019, Nelson Company leases certain prop crty to Queens Company at an annual rental of So0,000 payable in advance at the beginning of each year for 8 T h i- hen 250 hasan 2