Cole Company leased office equipment from Bean Leasing on 1/1/Year1. The fair value of the equipment...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Cole Company leased office equipment from Bean Leasing on 1/1/Year1. The fair value of the equipment was $120,000, and it has an estimated useful life of 10 years. Bean earns 10% on leases of this type. Cole leased it for 6 years and made 6 annual payments of $18,400. The first payment was on 12/31/Yrl and the other payments occurred on December 31 of Year2 through Year6. The present value of Cole's lease payments at the 10% implicit rate is $80,137. (This is the annual lease payment of 18,400 x the factor for the PV of an ordinary annuity due factor. 1. Is this an operating lease or a financing lease? Check your answer in the quiz linked in this folder called "Lease Question A check." Use the correct classification for the remaining questions. 2. What journal entry will Cole record to reflect the original lease payable obligation on 1/1/Yr1? 3. Complete the amortization table for the lease payable. Ignore any small rounding error at the end. 4. How much of the lease payment on 12/31/yr1 is labeled interest on the lease payable amortization schedule? 5. Related to this lease, how will Cole report as each of the following on the income statement for Year1? Hint: consider your answer to Question 1 as we have different reporting for the 2 types of leases. If the account title is not used on the income statement for this type of lease, answer N/A. You will have at least one N/A. a. Lease or rent expense b. Interest expense c. Amortization expense 6. What is the lease liability amount after the payment on 12/31/Y1? 7. How will Cole report the lease liability on the balance sheet (as a regular liability or as a non-debt liability)? 8. What will Cole report as a right-of use asset on the balance sheet at 12/31/Year1? 9. Does the lessor (Bean Leasing) remove the leased equipment from its assets when the lease is assigned? Answer just Yes or No. 10. If Bean (the Lessor) paid a legal fee in connection with executing the lease documents, how would the cost be treated. (Choose A. or Band you just need to type the letter A. Expense all of the cost in Yearl B. Expense evenly over 6 years, Cole Company leased office equipment from Bean Leasing on 1/1/Year1. The fair value of the equipment was $120,000, and it has an estimated useful life of 10 years. Bean earns 10% on leases of this type. Cole leased it for 6 years and made 6 annual payments of $18,400. The first payment was on 12/31/Yrl and the other payments occurred on December 31 of Year2 through Year6. The present value of Cole's lease payments at the 10% implicit rate is $80,137. (This is the annual lease payment of 18,400 x the factor for the PV of an ordinary annuity due factor. 1. Is this an operating lease or a financing lease? Check your answer in the quiz linked in this folder called "Lease Question A check." Use the correct classification for the remaining questions. 2. What journal entry will Cole record to reflect the original lease payable obligation on 1/1/Yr1? 3. Complete the amortization table for the lease payable. Ignore any small rounding error at the end. 4. How much of the lease payment on 12/31/yr1 is labeled interest on the lease payable amortization schedule? 5. Related to this lease, how will Cole report as each of the following on the income statement for Year1? Hint: consider your answer to Question 1 as we have different reporting for the 2 types of leases. If the account title is not used on the income statement for this type of lease, answer N/A. You will have at least one N/A. a. Lease or rent expense b. Interest expense c. Amortization expense 6. What is the lease liability amount after the payment on 12/31/Y1? 7. How will Cole report the lease liability on the balance sheet (as a regular liability or as a non-debt liability)? 8. What will Cole report as a right-of use asset on the balance sheet at 12/31/Year1? 9. Does the lessor (Bean Leasing) remove the leased equipment from its assets when the lease is assigned? Answer just Yes or No. 10. If Bean (the Lessor) paid a legal fee in connection with executing the lease documents, how would the cost be treated. (Choose A. or Band you just need to type the letter A. Expense all of the cost in Yearl B. Expense evenly over 6 years,
Expert Answer:
Answer rating: 100% (QA)
Company leased office equipment from Bean Leasing on 11Year1 The fair value of the equipment was 120... View the full answer
Posted Date:
Students also viewed these accounting questions
-
A firm purchases machinery, which has an estimated useful life of 10 years and no salvage value , for $48,000 at the beginning of the accounting period. What is the adjusting entry for depreciation...
-
An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2002, for $540,000. On January 1, 2012, a review was made of intangible assets and their expected service...
-
An intangible asset with an estimated useful life of 30 years was acquired on January 1, 2009, for $540,000. On January 1, 2019, a review was made of intangible assets and their expected service...
-
A manufacturer of diaphragm seals has identified the cash flows shown for manufacturing and sales functions. Determine the no-return payback period. First cost of equipment,....................$...
-
Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Instructions Determine the amounts that should...
-
Read CVss note on commitments and contingencies in the Supplement to Chapter 16. What commitments and contingencies does the company have? Why is it important to consider this information when...
-
Prepare a general journal form like the one in Exhibit 4 and label it Page 4. Record the following transactions in the journal: Sept. 6 Billed a customer for services performed, $3,800. 16 Received...
-
XS Supply Company is developing its annual financial statements at December 31, 2010. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and...
-
[ The following information applies to the questions displayed below. ] The following data is provided for Garcon Company and Pepper Company for the year ended December 3 1 . Exercise 1 8 - 7 ( Algo...
-
Carrie D'Lake, Reed A. Green, and Doug A. Divot share a passion for golf and decide to go into the golf club manufacturing business together. On January 2, 2015, D'Lake, Green, and Divot form the...
-
Explain briefly what linked accounts are, which accounting principle the linked accounts based on and how do you view & edit the linked accounts. If the linked accounts change, how will this be...
-
Is the following relation a function? Yes or no and explain why. {(3,2), (1, 2), (-1, -4), (1, 2)}
-
1. Conduct financial analysis of the nestle pakistan using percentage of sales approach of forecasting to find EFN of the nestle pakistan 2. Find SGR of the nestle pakistan and calculate the new debt...
-
What challenges and opportunities arise from the increasing adoption of ISO 20022 messaging standards within the SWIFT network, including the harmonization of messaging formats, data richness, and...
-
Project Control and Risks: -Discuss the general strategy that will be used to manage the project to completion. -Project must have at least two phases. Discuss how they connect to each other, and the...
-
The following information relates to Corporation J and its transactions during the year. The corporation provides consulting services across Canada and has trademarked one of its lines of service. It...
-
What is the tike constraint in health production
-
If you want to solve a minimization problem by applying the geometric method to the dual problem, how many variables and problem constraints must be in the original problem?
-
Information concerning operations of Norris Weather Gear Corporation during 20xx is as follows: a. Administrative expenses, $180,000 b. Cost of goods sold, $840,000 c. Extraordinary loss from an...
-
Effects of Inventory Costing Methods} Refer to the information for Tyler Company above. \section*{Required:} 1. Which inventory costing method produces the highest amount for net income? 2. Which...
-
Inventory Analysis} Callahan Company reported the following information for the current year: \section*{Required:} 1. Compute Callahan's (a) gross profit ratio, (b) inventory turnover ratio, and (c)...
Study smarter with the SolutionInn App