Sunland Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Coronado Airlines for a period of 10 years. The normal selling price of the equipment is $291,687, and its unguaranteed residual value at the end of the lease term is estimated to be $20,800. Coronado will pay annual payments of $43,500 at the beginning of each year. Sunland incurred costs of $164,300 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Coronado Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to 0 decimal places eg. 58,971) The amount of the initial lease liability $

Sunland Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Coronado Airlines for a period of 10 years. The normal selling price of the equipment is $291,687, and its unguaranteed residual value at the end of the lease term is estimated to be $20,800. Coronado will pay annual payments of $43,500 at the beginning of each year. Sunland incurred costs of $164,300 in manufacturing the equipment and $4,300 in sales commissions in closing the lease. Sunland has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Coronado Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to 0 decimal places eg. 58,971) The amount of the initial lease liability $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 2P

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?
Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor. This is a sales-type lease Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 5.275) (1) Lease receivable S (2) Sales price S (3) Cost of sales $
George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $299,140, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in sales commissions in closing the lease. George has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Instructions a. Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items. 1. Lease receivable. 2. Sales price. 3. Cost of goods sold. b. Prepare a 10-year lease amortization schedule for George, the lessor. c. Prepare all of the lessor's journal entries for the first year.
Crane Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Cheyenne Airlines for a period of 10 years. The normal selling price of the equipment is $252,640, and its unguaranteed residual value at the end of the lease term is estimated to be $21,300. Cheyenne will pay annual payments of $37,500 at the beginning of each year. Crane incurred costs of $173,900 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 11%. Cheyenne Airlines has an incremental borrowing rate of 11%. Click here to view factor tables. (a) Your Answer Correct Answer (Used) Your answer is correct. Discuss the nature of this lease in relation to the lessee. This is a finance lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer…
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Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee.
Wildhorse Company manufactures a check-in kiosk with an estimated economic life of 10 years and leases it to Sheffield Chicken for a period of 9 years. The normal selling price of the equipment is $172,124, and its unguaranteed residual value at the end of the lease term is estimated to be $26,200. Sheffield will pay annual payments of $20,800 at the beginning of each year. Wildhorse incurred costs of $141,100 in manufacturing the equipment and $2,400 in sales commissions in closing the lease. Wildhorse has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Sheffield Chicken has an incremental borrowing rate of 5%. The lessor's implicit rate is unknown to the lessee. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessee. This is a sales-type lease Compute the amount of the initial lease liability. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final…
Canada M. manufactures special equipment with an estimated economic life of 12 years and leases it to Phranka for a period of 10 years commencing January 1, 2021. The unguaranteed residual value at the end of the lease term is estimated to be $15,000. Phranka will make annual payments of $25,000 at the beginning of each year and pay for all maintenance and insurance costs. Canada M. incurred costs of $105,000 in manufacturing the equipment but is looking to make a profit on the sale of equipment. In addition, Phranka incurred $7000 in costs tied to negotiating and closing the lease. Canada M. has determined that the collectability of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%. Phranka has a borrowing rate of 8%. How should Canada M. classify this lease transaction? a. Classify as an operating lease. b. Classify as a capital, sales type lease. c. Classify as a capital, direct finance type lease.…
6... Cheyenne Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $276,779, and its unguaranteed residual value at the end of the lease term is estimated to be $18,400. National will pay annual payments of $39,900 at the beginning of each year. Cheyenne incurred costs of $189,300 in manufacturing the equipment and $3,700 in sales commissions in closing the lease. Cheyenne has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%. Prepare a 10-year lease amortization schedule for Cheyenne, the lessor. (Round answers to 0 decimal places e.g. 5,275.) CHEYENNE COMPANY (Lessor)Lease Amortization ScheduleAnnuity Due Basis, Unguaranteed Residual Value Beginningof Year Annual Lease PaymentPlus Residual Value Interest onLease Receivable Lease ReceivableRecovery…
Crane SA manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is R$594,813, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be R$18,000. The hospital will pay rents of R$72,000 at the beginning of each year. Crane incurred R$410,000 in manufacturing cost and R$14,200 in legal fees directly related to the signing of the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Click here to view factor tables. Discuss the nature of this lease in relation to the lessor. The nature of this lease in relation to the lessor is Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places, e.g. 5,275.) (1) (2) (3) Lease receivable at commencement of the…
Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.