E 15-1 Operating lease 104 On January 1, 2011. Nuh-Langstrom Services, a computer software training firm, lased several computers from Computer World Corporation under a two-year operating lose agreement. The contract calls for four payments of $10000 each, payable semia sually on June 30 and December each year. The computers were acquired by Computer World at a cost of $90,000 and were expected to have a sful life of six years with me dal value Required: Prepare the appropriate entries for both (a) the less and (b) the lessor from the inception of the less through the end of 2011. (Use wright-line depreciation) E 15-3 Finance lease (Note: Exercises 3, 4, and are three variations of the same basic situation) Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011 Edison purchased the equipment from International Machines at a cost of $112.080. Related Information 2 years ( quarterly periods $15,000 at the beginning of each period Lease term Quarterly rental payments Economic life of asset Fair value of Implicit interest rate Also lessee's incremental borrowing rate $112,080 E 15-4 Directance Required: Prepare a lease amortization schedule and approprimeres for Manufacturers Southern from the inception of the lease through January 1, 2012. Depreciation is recorded at the end of each fancial year (December 31) on a straight line basis Edison Leasing leased high-tech electronic equipment to Manufacturers Southem on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: Lease term 2 years (8 quarterly periods Quarterly rental payments $15.000 at the beginning of each period Economic We of asset 2 years Fair value of asset $112.080 Implicit interest rate Also lessee's incremental borrowing rate LOS E 15-5 Sales-type lase: lessor .LOG Required: Prepare a case amortization schedule and appropriate entries for discs Leasing from the inception of the lease through January 1, 2012. Edison's financial year ends December 31 Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2011. International Machines manufactured the equipment at a cost of $35.000 Related information Lease term 2 years ( quarterly periods Quarterly rental payments $15.000 at the beginning of each period Economic ife of asset 2 years Fair value of asset $112.080 Implicit interest rate (Also lessee's incremental borrowing rate) Required: 1. Show how International Machines determined the $15,000 quarterly rental payments. 2. Prepare appropriate entries for International Machines to record the lease at its inception, January 1, 2011. and the second rental payment on April 1, 2011. Source: Spiceland et al., (2013). Intermediate Accounting: IFRS Edition Page 1 P 15-3 Direct finance and sales-type lease: lessee and lessor LOS LOS LO6 12 Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones, Physicians' Leasing purchased a lithotripter from Rand for $2,000,000 and leased it to Mid-South Urologists Group, on January 1, 2011 Lease Description: Quarterly lease payments $130,516 at the beginning of each period Lease term 5 years (20 quarters) No residual value; no BPO Economic life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate Fair value of asset $2,000,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the inception of the lease through the second rental payment on April 1, 2011. Depreciation is recorded at the end of each financial year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical which produced the machine at a cost of $1.7 million. Prepare appropriate entries for Rand Medical from the inception of the lease through the second lease payment on April 1, 2011 E 15-1 Operating lease 104 On January 1, 2011. Nuh-Langstrom Services, a computer software training firm, lased several computers from Computer World Corporation under a two-year operating lose agreement. The contract calls for four payments of $10000 each, payable semia sually on June 30 and December each year. The computers were acquired by Computer World at a cost of $90,000 and were expected to have a sful life of six years with me dal value Required: Prepare the appropriate entries for both (a) the less and (b) the lessor from the inception of the less through the end of 2011. (Use wright-line depreciation) E 15-3 Finance lease (Note: Exercises 3, 4, and are three variations of the same basic situation) Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2011 Edison purchased the equipment from International Machines at a cost of $112.080. Related Information 2 years ( quarterly periods $15,000 at the beginning of each period Lease term Quarterly rental payments Economic life of asset Fair value of Implicit interest rate Also lessee's incremental borrowing rate $112,080 E 15-4 Directance Required: Prepare a lease amortization schedule and approprimeres for Manufacturers Southern from the inception of the lease through January 1, 2012. Depreciation is recorded at the end of each fancial year (December 31) on a straight line basis Edison Leasing leased high-tech electronic equipment to Manufacturers Southem on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $112,080. Related Information: Lease term 2 years (8 quarterly periods Quarterly rental payments $15.000 at the beginning of each period Economic We of asset 2 years Fair value of asset $112.080 Implicit interest rate Also lessee's incremental borrowing rate LOS E 15-5 Sales-type lase: lessor .LOG Required: Prepare a case amortization schedule and appropriate entries for discs Leasing from the inception of the lease through January 1, 2012. Edison's financial year ends December 31 Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2011. International Machines manufactured the equipment at a cost of $35.000 Related information Lease term 2 years ( quarterly periods Quarterly rental payments $15.000 at the beginning of each period Economic ife of asset 2 years Fair value of asset $112.080 Implicit interest rate (Also lessee's incremental borrowing rate) Required: 1. Show how International Machines determined the $15,000 quarterly rental payments. 2. Prepare appropriate entries for International Machines to record the lease at its inception, January 1, 2011. and the second rental payment on April 1, 2011. Source: Spiceland et al., (2013). Intermediate Accounting: IFRS Edition Page 1 P 15-3 Direct finance and sales-type lease: lessee and lessor LOS LOS LO6 12 Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones, Physicians' Leasing purchased a lithotripter from Rand for $2,000,000 and leased it to Mid-South Urologists Group, on January 1, 2011 Lease Description: Quarterly lease payments $130,516 at the beginning of each period Lease term 5 years (20 quarters) No residual value; no BPO Economic life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate Fair value of asset $2,000,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the inception of the lease through the second rental payment on April 1, 2011. Depreciation is recorded at the end of each financial year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical which produced the machine at a cost of $1.7 million. Prepare appropriate entries for Rand Medical from the inception of the lease through the second lease payment on April 1, 2011