Exam 18: Accounting for Leases

List four examples of the risks and four examples of rewards of ownership.

On May 1,2018,Janus Company entered into a ten-year lease for equipment.Annual lease payments are $5,000,payable at the beginning of each lease year (May 1).At the end of the lease,possession of the equipment will revert to the lessor.The equipment has an expected useful life of 10 years.Similar equipment could be purchased for $90,000 cash.Janus's incremental borrowing rate is 6%.The company has a April 30 year-end,and it uses straight-line depreciation for its property,plant,and equipment. Required: a.Prepare the journal entries relating to the lease and leased asset for Janus's fiscal year ending April 30,2019. b.State the amounts related to the lease that would be reported on the April 30,2019 balance sheet,indicating the balance sheet classifications,account names,and amounts.

On January 1,2017,Rushabh Company entered a lease to rent office space.The lease requires Rushabh to pay $190,000 per year,at the end of each year,for 10 years.The lease is non-cancellable and non-renewable.The building's estimated useful life is 30 years,and its current fair value is estimated to be $6 million.Rushabh's incremental borrowing rate is 9%. Required: Classify this lease for Rushabh Company and record the journal entries for the first year of the lease.

Which will increase the "agency cost of leasing"?

On July 1,2017,Janus Company leased equipment to Pluto Company.The terms of the lease are as follows: Pluto uses straight-line depreciation for its property,plant,and equipment,and its year-end is December 31. Required: Prepare the journal entries for the lease from July 1 through December 31.

On January 1,2017,Travic Company entered a lease to rent office space.The lease requires Travic to pay $390,000 per year,at the end of each year,for 20 years.The lease is non-cancellable and non-renewable.The building's estimated useful life is 30 years,and its current fair value is estimated to be $6 million.Travic's incremental borrowing rate is 10%. Required: Classify this lease for Travic Company and record the journal entries for the first year of the lease.

Here are the terms of a lease agreement: Required: Determine the amount of lease payment that the lessor would require to lease the asset.

Company A and Company B operate in the same industry,where leasing assets is common practice.Company A engages in more finance leases than Company B.Company B's leases are classified as operating leases,but they are essentially a form of financing as well.Both companies disclose information with respect to their leases.Which of the two companies will tend to appear stronger financially according to the balance sheet and income statement?

What is the implicit rate?

Identify whether the following characteristics/facts are relevant to a finance (capital)lease.

Which statement is correct?

The following amortization schedule is for a lease entered into at the start of fiscal 2016 for an asset that will be useful for 5 years.The company uses straight-line depreciation method. Required: Provide the appropriate presentation of this lease in the lessee's balance sheet for December 31,2017,distinguishing amounts that are current from those that are non-current.