Technold Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: Lease payments: $3,144,993 semiannually, first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028 • Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. • Implicit interest rate and lessee's incremental borrowing rate: 9% semiannually. • Fair value of the computers on January 1, 2024: $22 million. What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024?

Technold Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: Lease payments: $3,144,993 semiannually, first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028 • Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. • Implicit interest rate and lessee's incremental borrowing rate: 9% semiannually. • Fair value of the computers on January 1, 2024: $22 million. What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024?

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 12P: Comprehensive Landlord Company and Tenant Company enter into a noncancelable, direct financing lease...

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
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?
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.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: • Lease payments: $2,466,754 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. • Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. • Fair value of the computers on January 1, 2024: $20 million. What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $15,943,154 $17,533,246 $21,000,000 None of these answer choices is correct.
Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $17 million. This noncancelable lease had the following terms: Lease payments: $2,691,724 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 6% semiannually. Fair value of the computers on January 1, 2024: $21 million. What is the interest revenue that Technoid would report for this lease in its income statement for the year ended December 31, 2024? Note: Round your answer to the nearest whole dollar.Multiple Choice $0 $2,101,400 $1,098,497 None of these answer choices is correct.
Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: • Lease payments: $2,466,754 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. • Lease term: five years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: five years. • Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. • Fair value of the computers on January 1, 2024: $20 million. What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice O $15,943,154 $17,533,246 O $21,000,000 None of these answer choices is correct.
What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice None of these answer choices is correct. $18,243,310 $24,000,000 $18,943,301
Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: Lease payments: $2,819,901 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: 5 years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 6% semiannually. Fair value of the computers on January 1, 2024: $22 million. What is the interest revenue that Technoid would report for this lease in its income statement for the year ended December 31, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $0 $2,201,466 $ 1,150, 806 None of these answer choices is correct.
Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $20 million. This noncancelable lease had the following terms: • Lease payments: $3,550,809 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028, • Lease term: 5 years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: 5 years. • Implicit interest rate and lessee's incremental borrowing rate: 10% semiannually. • Fair value of the computers on January 1, 2024: $24 million. What is the outstanding balance of the lease liability in Lone Star's balance sheet on June 30, 2024? Note: Round your answer to the nearest whole dollar. Multiple Choice $18.943.301 $18,143,310 $24,000,000 None of these answer choices is correct.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: • Lease payments: $2,466,754 semiannually; fırst payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025. Fair value of the lease payments is $20 million. • Lease term: five years (10 semiannual payments). • No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. What is the interest revenue that Technoid would report for this lease in its 2021 income statement? 1. A) $0. 2. B) $1,673,820. 3. C) $876,662. 4. D) None of these answer choices is correct. O A O B O D
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2021. The manufacturing cost of the computers was $18 million. This noncancelable lease had the following terms: • Lease payments: $3,035,786 semiannually; first payment at January 1, 2021; remaining payments at June 30 and December 31 each year through June 30, 2025. •Lease term: 5 years (10 semiannual payments). • No residual value; no purchase option. • Economic life of equipment: 5 years. Implicit interest rate and lessee's incremental borrowing rate: 8% semiannually. Fair value of the computers at January 1, 2021: $22 million. What is the interest revenue that Technoid would report for this lease in its 2021 income statement? (Round your answer to the nearest whole dollar.)