CHAPTER 15 Leases 901 Terms of a lease agreement and related facts were: a. Leased asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $20,873, beginning January 1. c. Lessor’s implicit rate when calculating annual rental payments was 10%. d. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $2,062. e. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its inception, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $100,000 to acquire the asset (direct financing lease). Also assume that adjusting the net investment by initial direct costs reduces the effective rate of interest to 9%. 3. The lease term is six years and the lessor paid $85,000 to acquire the asset (sales-type lease). The following relate to an operating lease agreement: a. The lease term is 3 years, beginning January 1, 2016. b. The leased asset cost the lessor $800,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets. c. Annual lease payments at the beginning of each year were $137,000. d. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $2,400. Required: Prepare the appropriate entries for the lessor from the inception of the lease through the end of the lease term. Terms of a lease agreement and related facts were: a. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $4,242. b. The retail cash selling price of the leased asset was $500,000. Its useful life was three years with no residual value. c. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. d. The lease term is three years and the lessor paid $500,000 to acquire the asset (direct financing lease). e. Annual lease payments at the beginning of each year were $184,330. f. Lessor’s implicit rate when calculating annual rental payments was 11%. Required: 1. Prepare the appropriate entries for the lessor to record the lease and related payments at its inception, January 1, 2016. 2. Calculate the effective rate of interest revenue after adjusting the net investment by initial direct costs. 3. Record any entry(s) necessary at December 31, 2016, the fiscal year-end. The lease agreement and related facts indicate the following: a. Leased equipment had a retail cash selling price of $300,000. Its useful life was five years with no residual value. b. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. c. The lease term is five years and the lessor paid $265,000 to acquire the equipment (sales-type lease). d. Lessor’s implicit rate when calculating annual lease payments was 8%. e. Annual lease payments beginning January 1, 2016, the inception of the lease, were $69,571. f. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $7,500. Required: Prepare the appropriate entries for the lessor to record: 1. The lease and the initial payment at its inception. 2. Any entry(s) necessary at December 31, 2016, the fiscal year-end. Listed below are several terms and phrases associated with leases. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it. E 15–21 Lessor’s initial direct costs; operating, direct financing and sales-type leases ● LO15–4, through LO15–6, LO15–9 E 15–22 Lessor’s initial direct costs; operating, direct financing and sales-type leases ● LO15–9 E 15–23 Lessor’s initial direct costs; direct financing lease ● LO15–9 E 15–24 Lessor’s initial direct costs; sales-type lease ● LO15–9 E 15–25 Concepts; terminology ● LO15–3 through LO15–9
Spiceland_Inter_Accounting8e_Ch15
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