Headland Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of$37,100 each, beginning December 31, 2019. In addition, Headland guarantees the lessor a residual value of $20,900 at the end of thelease. However, Headland believes it is probable that the expected residual value at the end of the lease term will be $10,450. Theequipment has a useful life of 6 years.Prepare Headlands' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Headland.(Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimalplaces as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.)Click here to view factor tables.DateDecember 31,2019December 31,2019Account Titles and Explanation(To record the lease liability)(To record lease payment)DebitCredit

An agreement of contract that is prepared to transfer the right to use the resources for a…

Headland Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $37,100 each, beginning December 31, 2019. In addition, Headland guarantees the lessor a residual value of $20,900 at the end of the lease. However, Headland believes it is probable that the expected residual value at the end of the lease term will be $10,450. The equipment has a useful life of 6 years.

Headland Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $37,100 each, beginning December 31, 2019. In addition, Headland guarantees the lessor a residual value of $20,900 at the end of the lease. However, Headland believes it is probable that the expected residual value at the end of the lease term will be $10,450. The equipment has a useful life of 6 years.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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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
Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6 years at 2,000 per month or to purchase the equipment for 25,000 (a price considerably less than the expected fair value) after the initial lease term of 4 years. Why would this lease qualify as a finance lease?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease on January 1, 2019, for nonspecialized equipment that cost the Landlord 280,000 (useful life is 6 years with no residual value). The fair value of the equipment is 300,000. The interest rate implicit in the lease is 14%. The 6-year lease requires 6 equal annual amounts payable each January 1, beginning with January 1, 2019. Tenant pays all executory costs directly to a third party on December 1 of each year. The equipment reverts to the lessor at the termination of the lease. Assume that there are no initial direct costs. Landlord expects to collect all rental payments. Required: 1. Next Level (a) Show how landlord should compute the annual rental amounts, (b) Discuss how the Tenant Company should compute the present value of the lease payments. What additional information would be required to make this computation? 2. Next Level Prepare a table summarizing the lease and interest receipts that would be suitable for Landlord. Under what conditions would this table be suitable for Tenant? 3. Assuming that the table prepared in Requirement 2 is suitable for both the lessee and the lessor, prepare the journal entries for both firms for the years 2019 and 2020. Use the straight-line depreciation method for the leased equipment. The executory costs paid by the lessee are in 2019: insurance, 700 and property taxes, 800; in 2020: insurance, 600 and property taxes, 750. 4. Next Level Show the items and amounts that would be reported on the comparative 2019 and 2020 income statements and ending balance sheets for both the lessor and the lessee, using the change in present value approach.
Vaughn Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $41,600 each, beginning December 31, 2019. In addition, Vaughn guarantees the lessor a residual value of $19,800 at the end of the lease. However, Vaughn believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 6 years. Prepare Vaughns' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Vaughn. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.)
Wildhorse Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $41,000 each, beginning December 31, 2019. In addition, Wildhorse guarantees the lessor a residual value of $21,300 at the end of the lease. However, Wildhorse believes it is probable that the expected residual value at the end of the lease term will be $11,300. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 11% and this is known to Wildhorse. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
Indiana Jones Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires six annual payments of $40,000 each, beginning December 31, 2019. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at the end of the lease. However, Indiana Jones believes it is probable that the expected residual value at the end of the lease term will be $10,000. The equipment has a useful life of 6 years. Prepare Indiana Jones' December 31, 2019, journal entries, assuming the implicit rate of the lease is 6% and this is known to Indiana Jones.
Sheridan Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $37,100 each, beginning December 31, 2019. In addition, Sheridan guarantees the lessor a residual value of $20,900 at the end of the lease. However, Sheridan believes it is probable that the expected residual value at the end of the lease term will be $10,450. The equipment has a useful life of 6 years.Prepare Sheridans' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Sheridan. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)
Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
Coronado Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $37,300 each, beginning December 31, 2019. In addition, Coronado guarantees the lessor a residual value of $19,400 at the end of the lease. However, Coronado believes it is probable that the expected residual value at the end of the lease term will be $9,400. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $170,000.Prepare Lost Ark’s 2019 and 2020 journal entries, assuming the implicit rate of the lease is 9% and this is known to Coronado. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275. Record journal entries in the order presented in the…
Oriole Corporation enters into a 6-year lease of equipment on December 31, 2024, which requires 6 annual payments of $36,300 each, beginning December 31, 2024. In addition, Oriole guarantees the lessor a residual value of $18,400 at the end of the lease. However, Oriole believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 6 years. Prepare Orioles' December 31, 2024, journal entries, assuming the implicit rate of the lease is 11% and this is known to Oriole. (List all debit entries before credit entries. 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. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view factor tables. Date December 31, 2024 December 31,…
Windsor Corporation enters into a 7-year lease of equipment on December 31, 2019, which requires 7 annual payments of $41,100 each, beginning December 31, 2019. In addition, Windsor guarantees the lessor a residual value of $18,400 at the end of the lease. However, Windsor believes it is probable that the expected residual value at the end of the lease term will be $9,200. The equipment has a useful life of 7 years. Prepare Windsors' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Windsor.