Exam 7: Financial Assets: Cash and Receivables

An asset with a market value of $100,000 is leased on 1/1/x0.Five annual lease payments are due each January 1 beginning 1/1/x0.The lessee guarantees the $40,000 residual value as of 12/31/x4,the last day of the lease term.The lessor's implicit interest rate is 8%.What is the annual lease payment?

The following information relates to a lease contract: Market value and book value (to lessor)of Interest rate used by both lessee and lessor The lease allows the lessee to purchase the asset for $200 on 1-1-x4. There are no uncertainties with respect to collectability of lease payments,or performance by lessor. (a)Determine the annual lease payment (b)Classify the lease for the lessee (c)Record the 2014 entries

In a sale and leaseback arrangement,the lessee is also:

Lessor Company leases small computers on three-year leases at the end of which the residual value is not material in amount.Rents are collected at year-end.On January 1,2014,Lessor signed a 3-year lease with Lessee Company that called for annual rents of $12,063,which was a return to Lessor of 10% on the $30,000 cost (market value at date of lease).Assume the lease qualifies as a direct financing lease to the lessor and a finance lease to the lessee.There was no bargain purchase option or residual value.The lessee's incremental borrowing rate is 12%. (a)Complete the following amortization schedule for the lease. Round to the nearest dollar. * May have slight rounding error. (b)Can both the lessor and lessee use the amortization schedule values in this instance? Yes __________________ No ___________________ Explain why _________________________________________________. (c)Give the entries for the lessor and lessee on the following dates (assume the accounting period ends December 31).Use the abbreviated account titles.

Off-balance sheet financing occurs when a company makes use of assets but does not record the asset or corresponding liability on the financial statements.

LOR leased a computer to LES which cost the lessor $8,000.The terms of the lease specify four years,an annual interest rate of 15 percent,and four year-end rental payments.The lease qualifies as a finance lease (direct financing).The lessor will get the computer after the fourth year and its residual value at that time is estimated to be $1,000.The amount of each rental payment is (round to the nearest dollar):

For the lessor,under a sales-type lease,the excess of the normal sales price (i.e.,current market)of the leased asset over its cost (or carrying amount)should be recognized as revenue by the lessor:

A journal entry is not required for either the lessor or lessee when an operating lease is initiated unless there is an advance payment,such as a lease bonus or prepayment of rent in addition to the periodic rents.

When the lessee guarantees only a portion of the estimated residual value,the:

Company A enters into a lease agreement with Company B. The going lease payment for a similar agreement is $90,000 per year. Company A negotiates a lease whereby they pay $40,000 per year and 6% of annual sales revenues. This is an example of what method? Contingent Rent

If the title to a leased asset transfers to the lessee at the end of the lease term,what is the period and residual value used by the lessor to depreciate the leased asset?

Choose the correct statement regarding the terms listed in the lessor's (1)minimum lease payments and (2)net lease receivable for a capitalized lease:

Which of the following is included in the lessor's cash flows but not the lessee's minimum lease payments?

CDE leases land and secures the landowner's permission to erect a warehouse on the leased site.The lease has 25 years to run from the time CDE completes the warehouse at a cost of $300,000.The warehouse is expected to last 50 years.In connection with the warehouse,CDE's annual depreciation should be:

To be classified as a finance lease by the lessee,no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor may exist.

Ryan Corp.leased an asset from Amanda Corp.under a finance lease.The original entry for finance lease included a debit to leased asset for $75,000.Amortization on the asset amounted to $7,500.At the end of the year,the lease liability on the books was $64,567.What is the after tax impact assuming a tax rate of 40%?

Any operating or executory costs should be excluded from the calculation of the minimum lease payments.

Ryan Corp.enters into an agreement with Montgomery Corp.to lease some office space in a very popular part of town.The agreement called for payments of $100,000 per year for five years and an upfront payment of $85,000.Explain the proper accounting treatment for the above situation.

In an operating lease,if a non-refundable down payment is made in advance,the lessor should initially debit Cash and credit Unearned Rent (liability).

If the lessor records unearned rent at the inception of a lease,then the lease must: