1. What is the initial lease liability? 2. What is the cost of the right of use asset? 3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
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At the start of the current year, Grace Company sold a building and
immediately leased it back, The following data pertain to the sale and
leaseback transaction: Sale price at above fair value P9M; FV of the building
is P8M, with carrying amount of P7,200,000 and annual rental payable at
the end of each year at P600,000. The remaining life of the building is 20
years and the lease term is 4 years. The implicit interest rate is 12%. PV of an
ordinary annuity of 1 at 12% for 4 years is 3.037.
1. What is the initial lease liability?
2. What is the cost of the right of use asset?
3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
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- At the beginning of current year, World Company sold a machine and immediately leased it back. The following data pertain to the sale and leaseback transaction:Sale price at fair value: 5,000,000Carrying amount of machine: 6,000,000Annual rental payable at the end of each year: 500,000Lease term: 5 yearsRemaining life of machine: 20 yearsImplicit interest rate: 6%Present value of an ordinary annuity of 1 at 6% for 5 periods: 4.21 What is cost of right of use asset? 2,895,0002,105,0002,526,0001,500,000At the beginning of current year, JadeCompany purchased a new machine forP4,800,000 and leased it to East the same day.The machine has an estimated 12-year life andwill be depreciated P400,000 per year. The leaseis for a three-year period at an annual rental ofP850,000.Additionally, East paid P300,000 to Jade as alease bonus to obtain the three-year lease. Jadeincurred insurance expense of P80,000 for theleased machine during the current year.What is the operating profit of the lessor on theleased asset for the current year?At the beginning of current year, Waxxy Company sold a machine and immediately leased back. The following data relate to the sale and leaseback transaction: Sale price at above fair value 6,000,000 Fair value of machine 5,000,000 Carrying amount of machine 4,500,000 Annual rental payable at the end of each year 800,000 Remaining life of machine 10 years Lease term 4 years Implicit interest rate 8% Present value of an ordinary annuity of 1 at 8% for four periods 3.312 There is no transfer of title to the lessee nor…
- On 30 June 2020, Cambridge Ltd leased a vehicle to Awamutu Ltd. Cambridge Ltd had purchased thevehicle on that day for its fair value of $89,721. The lease agreement, which cost Cambridge Ltd $1,457 tohave drawn up, contained the following provisions:Lease Term 4 yearsAnnual payment, payable in advance on 30 June each year $23,900Economic life of vehicle 6 yearsEstimated residual value at end of economic life 52,000Estimated residual value at end of lease term $15,000Residual value guaranteed by lessee $15,000Interest rate implicit in the lease 7%The lease is cancellable, but cancellation will incur a monetary penalty equivalent to 2 years rentalpayments. Included in the annual payment is an amount of $1900 to cover reimbursement for the costsof insurance and maintenance paid by the lessor. The directors of Awamutu Ltd have indicated that theyare interested in acquiring the asset at the end of the lease.a) Prepare the following for the lessor, Cambridge Ltd:1. the lease receipts…At the beginning of current year , EDSA company leased a building with the following information: 1) Annual fixed payment in advance at the beginning of each lease year -1,000,000 2) initial direct cost paid 350,000 3) Lease incentive received -150,000 4) Lease bonus paid to lessor before commencement of lease- 100,000 5) Present value of cost of restoring the building as required by contract discounted at 6% -200,000 6) Purchase option that is not reasonably certain to be exercised - 300,000.00 7) Lease term 5 years 8) Implicit interest rate 8% 9) PV of an annuity of 1 in advance at 8% for 5 periods 4.31 10) PV of 1 at 8% for 5 periods .68. What is the initial lease liability? 4,310,000.00 4,614,000.00 4,764,000.00 4,514,000.00 Answer fast with solutionAn entity acquired an asset costing P3,165,000. The asset is leased on January 1, 2019 to another entity. Five annual lease payments are due each December 31, beginning December 31, 2019. The unguaranteed residual value of the asset at the end of the lease term on December 31, 2013 is P500,000. The asset will revert to the lessor at the end of the lease term. The lessor’s implicit interest rate is 12%. The PV of 1 at 12% for 5 periods is .57 and the PV of an ordinary annuity of 1 at 12% for 5 periods is 3.60. What is the annual rental payment? 879,166 740,128 800,000 500,000
- JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd $16m and has an expected useful life of 12 years. Its selling price is $22.4m. The present value of the lease payments is $20.4m. The first payment was made at the commencement of the lease. Required: How should JK Ltd classify this list and why?Angelo Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P2,300,000. On January 1, 2020, Angelo Company leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual payment are due each January 1 and the first payment was made on January 1, 2020. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is earned by Angelo Company. What is the annual lease payment payable in advance required to yield the desired return?Ground Company leased a parcel of land to Sparks Company for six years. The lease agreement states that theSparks will pay rental of P200,000 on the first year, to be increased by P10,000 annually. There is also a provision that Ground is to receive a lease bonus of P30,000 and a security deposit of P60,000, refundable atthe end of the lease contract. How much total amount reported in the yearend Balance Sheet of Sparks Company for the third year relating to the lease? [Indicate whether it is an asset or liability] How much total amount reported in the yearend Balance Sheet of Ground Company for the fourth year relating to the lease? [Indicate whether it is an asset or liability]
- Saludares Company leased a machinery on January 1, 2021 with the following information: Annual rental payable at the end of each year is P1,000,000. A P300,000 payment is made to the lessor to obtain a long-term lease. At the end of the lease term, dismantling and restoring the machinery is required by contract. The present value of this obligation is P330,000. Annual executory costs paid by the lessee amount to P50,000. Lease term is 4 years and the useful life of the machinery is 8 years. The implicit rate is 10%. The PV of an ordinary annuity of 1 at 10% for 4 periods is 3.17 and the PV of 1 at 10% for 4 periods is 0.68. 1. What is the depreciation for 2021?2. What is the lease liability on December 31, 2021?On 1 July 2023, Station Ltd leased machinery to Depot Ltd. The machinery was purchased by Station Ltd on 1 July 2023 for its fair value of $233,556. The lease agreement contained the following provisions: Lease term 3 years Economic life of machinery 5 years Annual rental payment, in arrears (commencing 30/6/2024) $75,000 Residual value at end of the lease term $45,000 Residual guaranteed by lessee $30,000 Interest rate implicit in lease 7% Depot Ltd incurred $1 200 in costs to negotiate the lease arrangement. Depot Ltd intends to return the machinery to the lessor at the end of the lease term. The reporting period ends 30 June. Required: Prepare a lease payment schedule for Depot Ltd. Prepare the journal entries for 1 July 2023 and 30 June 2024.Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $114,321. (FV of $1, PV of $1, FVA of $1, PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term Quarterly rental payments. Economic life of asset Fair value of asset Implicit interest rate (Also lessee's incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal year ends December 31. Complete this question by entering your answers in the tabs below. Amort Schedule Payment Date 01/01/2021 01/01/2021 04/01/2021 07/01/2021 10/01/2021 01/01/2022 04/01/2022 07/01/2022 10/01/2022 General Journal Prepare a lease amortization schedule for Edison Leasing from the beginning of the lease through January 1, 2022. Edison's fiscal…
