Exam 8: Accounting for Leases

The following are some of the characteristics of an asset available for lease: Required: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee.

Compare the impact of finance leases and operating leases to the balance sheet and income statement of the lessee.

List four major risks of ownership.

The following are characteristics of a lease: Required: Determine the appropriate classification for this lease for the lessor (who is not the manufacturer)and record the journal entries for the lessor for the first year of the lease.Assume the lessor only earns interest on the transaction.

What are the advantages to the lessee of an operating lease?

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.

The terms of a lease are as follows: Which of the following is correct?

The following are some of the characteristics of an asset available for lease: Required: a.Determine the amount of lease payment that the lessor would require to lease the asset. b.Compute the present value of minimum lease payments for the lessee.

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

Under ASPE,assuming all information is available,which rate is used by the lessee in the lease present value calculations?

For the following lease,determine the minimum present value calculation for the lessor.

Which will increase the "agency cost of leasing"?

The following are characteristics of a lease that started on January 1: Required: a.Determine the appropriate classification for this lease for the lessor (who is not the manufacturer)and the lessee. b.record the journal entries for the lessor for the first year of the lease. c.Prepare the journal entries for the lessee for the first year.Assume the lessee uses straight-line depreciation for its property,plant,and equipment..

The following are the characteristics of a lease: Required: Determine the present value of minimum lease payments (MLP)and the appropriate classification of this lease for the lessee.

Assume that Speery agrees to lease a new machine from Leery on January 1,2017,for $30,000 per year,paid in advance (i.e.,at the beginning of the year).The lease term is 10 years and the asset's useful life is 8 years.There is no bargain purchase option.The unguaranteed residual value is $10,000.Which statement is correct?

Cerebral Corporation started operations on March 1,2017.It needs to acquire a special piece of equipment for its manufacturing operations.It is evaluating two options as follows. Option 1: Lease the equipment for 5 years.Lease payments would be $12,000 per year,due at the beginning of each fiscal year (March 1).Cerebral's incremental borrowing rate is 5%.There is no bargain purchase or renewal option.Cerebral is responsible for all executory costs of operating the equipment. Option 2: Purchase the equipment for $58,000 by borrowing the full purchase amount at 5% over 5 years.This price is considered the fair value of the equipment.Payments are due at the end of each fiscal year (February 28). The equipment has a useful life of 5 years and would be depreciated on a straight-line basis.No residual value is expected to exist at the end of 5 years. Required: a.Calculate the present value of the lease payments (Option 1). b.Calculate the payment that would be required under the purchase option (Option 2). c.Calculate and briefly discuss the financial impact of each option on the non-current assets,total liabilities,and net income of Cerebral for the first year of operations.Assume all payments were made when due.Show your calculations.

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

Which entry is needed by the lessee for an operating lease?

For the following lease,determine the minimum present value calculation for the lessor.

What entry is required for the lessor in a operating lease?