Exam 7: Financial Assets: Cash and Receivables

Which of the following are the required operating lease note disclosure requirements for the lessee? 1.Minimum lease payments 2)Contingent Rents 3)Scheduled lease payments for the next year 4)Scheduled lease payments in total for the next remaining years 5)Scheduled lease payments in total for all years.

ML leased a computer to LH on January 1,2014.The lease was a five year fixed,non-cancellable agreement.The payments were finalized at $2,380 per year with the first payment on January 1,2014 and ML paid $9,500 for the computer.Carrying value is equal to fair value and there was a guaranteed residual value by lessee of $2,000.The lease is deemed a finance lease.Based on the above information,what type of lease is this for the lessor? Prepare the journal entries for at the inception of the lease using the gross method.

ABC INC.entered into a direct financing lease with QRS to rent a machine that cost $157,895.The lease term was for six years.The annual rentals are payable at the beginning of each year,and ABC INC.expects to earn a 14 percent rate of return.The required amount of the annual rentals is (rounded to the nearest dollar):

ABC Inc.leased a computer to the Lennox Silver Company on 1 April 2018.The terms of the lease are as follows: *** ABC Inc.company charges a half-year depreciation in the year of acquisition and a half-year in the year of disposition,regardless of the actual dates of acquisition and disposal. From the above information,show how the leased asset and the lease obligation will be shown on the lessee's balance sheet at 31 December 2019.

LAS owns a building in North Bay.LAS enters into an agreement with BH as follows: LAS sells the building to BH on 1/1/2014 for $1,900,000 (the building's fair value on that date was $1,800,000)and immediately leases it back for $500,000 per year for 10 years.The remaining life of the building is estimated at 20 years.The historical cost of the building was $9,000,000 and accumulated amortization amounted to $7,000,000.Assuming that ASPE applies,and that the lease does not qualify as a finance lease,the net effect of this transaction on the statement of comprehensive income in the year of sale would be:

A lessee that enters into a finance lease must disclose which of the following? 1)Any significant finance lease arrangements. 2)Any contingent rent recognized as expense during the period. 3)The net carrying value of each class of leased asset at the reporting date. 4)Total future minimum lease payments. 5)A reconciliation between total minimum future lease payments and their present value.

The estimated residual value of a depreciable leased asset at the end of the lease term is:

You are analyzing the balance sheet of a large manufacturing company and come across the following account in the property,plant and equipment section: The footnotes indicate that the lease was signed three years ago,that there are several years left in the finance lease,and that the equipment reverts to the lessor at the end of the lease term.The reporting company does not use the accumulated depreciation account for assets under finance leases. Explain (a)what this account and (b)amount means,and (c)how it came to be included as a long-term asset. (a)The account came about through capitalizing the present value of the future cash flows expected under the lease.

On January 1,2014,CDE Company leased an asset from LMN which originally cost the lessor $75,000.The lease agreement was an operating lease and specified that three $10,500 annual rentals were to be paid at the beginning of each year.LMN should make the following entry on January 1,2014:

The basic accounting issue for lessors is:

The inception of a lease is 1/1/x1.A third party guarantees the residual value of the asset under lease,estimated to be $12,000 at 1/1/x6,the end of the lease term.Annual lease payments are $10,000 due each December 31 beginning 12/31/x1.The last payment is due 12/31/x5.Both the lessor and lessee use 10% as the interest rate.The remaining useful life of the asset was 6 years at inception.What is the net asset balance for the lessor and net liability balance for the lessee,at inception (rounded to the nearest dollar)?

One incentive for entering into sale-and-leaseback arrangements is:

A lessor and lessee enter into a lease agreement with the following characteristics: Inception: 1/1/x0 6 annual lease payments of $10,000 are due each Jan.1 beginning 1/1/x0 Assuming the lessee will capitalize this lease,what is the amount of the net lease liability at inception,before the first payment is made?

If a lease transfers the residual value of the leased asset to the lessee at the end of the lease term,the lessee has permanent ownership of the leased asset.

The effective interest method is normally used to compute the lessor's finance expense related to a finance lease.

A lessor and lessee enter into a lease agreement with the following characteristics: Inception: 1/1/x0 annual lease payments of $10,000 are due each Jan.1 beginning1/1/x0 End of lease term: 12/31/x5 Book value of equipment under lease,at inception: $35,000 Market value of equipment under lease,at inception: $50,000 Remaining useful life of equipment at inception: 9 yrs Expected residual value at end of lease term: $4,000 Interest rate used by lessor and lessee: 10% Assuming the lessor will capitalize this lease,what is the amount of the net lease receivable for the lessor,before the first payment is made?

XYZ agreed to lease an industrial machine that cost $108,000 to RST for six years.The lease was a direct financing lease and a 12 percent interest rate was used to calculate the annual lease payments,which were payable at the end of each year.The amount of each annual rental was:

On January 1,2014,LE Corporation leased a machine from LOC for a period of three years and paid $4,800 at the inception of the lease. In addition,five equal rentals of $4,800 are to be paid at the beginning of each six-month period thereafter.The effective annual interest rate was 8%.The lease qualifies as a finance lease. (a)Compute the amount of the lease liability at 1/1/x1. (b)Complete LEC's partial amortization schedule given below. Round amounts to the nearest dollar.

Ryan Corp.is a manufacturer of high tech golf carts.On December 31,1999,Ryan Corp.leases 100 golf carts to a local golf course for five years at $95,000 per year payable at the beginning of the lease term.The normal cash sales price of the carts is $3,500 each.The carts cost Ryan Corp.$3,000 each to manufacture.The lease meets all the conditions necessary to be a sales-type lease from the lessor's point of view.Provide the journal entry(ies)on December 31x1 to account for the lease and the first payment on December 31x2

Under a sales-type lease,the lessor recognizes a dealer's or manufacturer's profit on the date of inception of the lease.