Practice chap 14

Lessee 112013 lessor 12312013 terms of a lease

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 31, 2013. Lessee: 1/1/2013 Lessor: 12/31/2013 Terms of a lease agreement and related facts were: a. b. c. d. e. Leased asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation). Annual lease payments at the beginning of each year were $20,873, beginning January 1. Lessor's implicit rate when calculating annual rental payments was 10%. Costs of negotiating and consummating the completed lease transaction Cost >initial direct incurred by the lessor were $2,062. 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: 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 Prepare the 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). 1/1/2013 12/31/2013 Operating Lease - The only revenue is rental revenue. Initial direct cost 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%. Imputed interest rate: 1/1/2013 Lease Payment 20,873 1 00000+2062 Interest Rate 10% 102062 Term 6 PV of Minimum Lease Payments ### Rounded by author to $100,000 Decrease Outstand Effective in ing Payments Interest Balance Balance 12/31/2013 1 /1/13 1 /1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 3. The lease term is six years and the lessor paid $85,000 to acquire the asset (sales-type lease). 1/1/2013 Decrease Outstand Effective in ing Payments Interest Balance Balance 1 /1/13 1 /1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 12/31/2013 rounding...
View Full Document

This note was uploaded on 03/03/2013 for the course ACC 321 taught by Professor Bukowy during the Spring '10 term at UNC Pembroke.

Ask a homework question - tutors are online