Page 78

Spiceland_Inter_Accounting8e_Ch15

928 SECTION 3 Financial Instruments and Liabilities In the situation described in BE 15–16, what will be the effect of the lease on Crescent’s (lessor’s) earnings for the first year (ignore taxes)? In the situation described in BE 15–15, what will be the balances in the balance sheet accounts related to the lease at the end of the first year for Café Med (ignore taxes)? In the situation described in BE 15–16, what will be the balances in the balance sheet accounts related to the lease at the end of the first year for Café Med (ignore taxes)? A Type A lease agreement calls for annual lease payments of $26,269 over a six-year lease term, with the first payment at January 1, the beginning of the lease, and subsequent payments at January 1 in each of the following five years. The interest rate is 5%. If the lessee’s fiscal year is the calendar year, what would be the amount of the lease payable that the lessee would report in its balance sheet at the end of the first year? What would be the interest payable? In the situation described in BE 15–20, what would be the amounts related to the lease that the lessee would report in its income statement for the first year ended December 31 (ignore taxes)? In the situation described in BE 15–20, assume the asset being leased cost the lessor $125,000 to manufacture and that the agreement causes the lessee to obtain “control” of the leased asset. Determine the price at which the lessor is “selling” the right to use the asset (present value of the lease payments). What would be the amounts related to the lease that the lessor would report in its income statement for the first year ended December 31 (ignore taxes)? A Type A lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the fair value and the cost of the asset to the lessor are $150,000. What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment on October 1? What would be the amount of interest revenue the lessor would record in conjunction with the second quarterly payment on October 1? King Cones leased ice cream-making equipment from Ace Leasing. Ace earns interest under such arrangements at a 6% annual rate. The lease term is eight months with monthly payments of $10,000 due at the end of each month. King Cones elected the short-term lease option. What is the effect of the lease on King Cones’ earnings during the eight-month term (ignore taxes)? BE 15–17 Lessor; effect on earnings; Type B lease BE 15–18 Lessee; effect on balance sheet; Type A lease BE 15–19 Lessee; effect on balance sheet; Type B lease BE 15–20 Lessee; accrued interest; balance sheet effects; Type A lease BE 15–21 Lessee; accrued interest; income statement effects; Type A lease BE 15–22 Lessor profit; income statement effects; Type A lease BE 15–23 Lessee and lessor; calculate interest; Type A lease BE 15–24 Short-term lease (Note: Exercises 15–33 through 15–36 are variations of the same basic lease situation.) Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2016. Edison purchased the equipment from International Machines at a cost of $112,080. Exercises E 15–33 Lessee; amortization schedule; journal entries; Type A lease Related Information: Lease term 2 years (8 quarterly periods) Quarterly lease payments $15,000 at Jan. 1, 2016, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter Economic life of asset 2 years Interest rate charged by the lessor 8% Required: Prepare a lease amortization schedule for the two-year term of the lease and appropriate entries for Manufacturers Southern from the beginning of the lease through December 31, 2016. The company’s fiscal year-end is December 31. Appropriate adjusting entries are recorded at the end of each quarter.


Spiceland_Inter_Accounting8e_Ch15
To see the actual publication please follow the link above