930 SECTION 3 Financial Instruments and Liabilities Other Information: Lease term 4 years Annual payments $279,556 beginning Jan.1, 2016, and at Dec. 31, 2016, 2017, and 2018 Life of asset 4 years Rate the lessor charges 8% Required: 1. Prepare the appropriate entries for Antonescu Sporting Goods (lessee) on January 1, 2016, and December 31, 2016. Round to nearest dollar. 2. Prepare the appropriate entries for Chapman Industries (lessor) on January 1, 2016, and December 31, 2016. Round to nearest dollar. On January 1, at the beginning of its fiscal year, Lakeside Inc. leased office space to LTT Corporation under a ten-year lease agreement. The contract calls for quarterly lease payments of $25,000 each at the end of each quarter. The office building was acquired by Lakeside at a cost of $1 million and was expected to have a useful life of 25 years with no residual value. Lakeside seeks a 10% return on its lease investments. Appropriate adjusting entries are made quarterly. Required: 1. What amounts related to the lease would LTT report in its balance sheet at December 31, 2016? 2. What amounts related to the lease would LTT report in its income statement for the year ended December 31, 2016 (ignore taxes)? On June 30, 2016, Papa Phil Inc. leased 200 pizza ovens for its chain of restaurants from IC Leasing Corporation. The lease agreement calls for Papa Phil to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment on June 30, 2016. IC calculated lease payment amounts using a 10% interest rate. IC purchased the 200 pizza ovens from Pizza Inc. at their retail price of $3 million. Required: 1. Determine the present value of the lease payments at June 30, 2016 (to the nearest $000) that Papa Phil uses to record the right-of-use asset and lease payable. 2. What amounts related to the lease would Papa Phil report in its balance sheet at December 31, 2016 (ignore taxes)? 3. What pretax amounts related to the lease would Papa Phil report in its income statement for the year ended December 31, 2016 (ignore taxes)? 4. Assume the retail price is $5 million, so we assume the risks and rewards are not transferred to the lessee. What amounts related to the lease would Papa Phil report in its income statement for the year ended December 31, 2016 (ignore taxes)? Problems P 15–24 Lessee; effect on financial statements; Type B lease P 15–25 Lessee; balance sheet and income statement effects; Type A lease; Type B lease The Antonescu Sporting Goods leased equipment from Chapman Industries on January 1, 2016. The agreement causes the lessee to obtain “control” of the leased asset. Chapman Industries had manufactured the equipment at a cost of $800,000. Its cash selling price and fair value is $1,000,000. P 15–23 Lessee and lessor; Type A lease; profit on sale
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