P21-7

P21-8

Expert Q&A Done Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Cjambers Medical Centerfor a period of 10 years. The normal selling price of the machine is $495,678, and its guranteed redidual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the medicine and $14,000 in legal fees directly related to the sigining of the lease. Amirante has determind that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. 943396 620794 680162 730087 11.158117 11421 2412 10 19 20 558395 330513 311805 L2,4) (Lessee-Lessor Entries, Finance Lease with a Guaranieed Residual Value) Glaus Leasing Company agrees e oqulpment to Jensen Corporation on January 1,2017. The following information relates to the lease agreement. The teem of the lease is 7 years with no renewal option, and the machinery has an estimated oconomic life ol 9 years 2 The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2017,i $700.000 3. At the end of the lease term, the asset feverts to the lessor and has a guaranteed residual value of $50,000 Jensen estimates that the expected residual value at the end of the lease term will b 550LDO e amortres all of ils keased equipment on a straight-line basis . The lease agreement requires equal annual rental payments, beginning on January 1,2017 The collectiblility of the lease payments is probablc Glaus desires a 5% rate pf return on its investments. Jensen's incremental borowing rate is 6 and the lessor's implicit rate is unknown Instructions (Assume the accounting period ends on December 31) (al Discuss the nature of this lease for both the lessee and the lessor (b) Calculate the amount of the annual rental payment requined. (e) Compute the value of the lease liability to the lesse. (d) Prepare the jounal eniries Jensen would make in 2017 and 2018 related to the lease arrangement (e) Prepare the joumal entries Glaus would make in 2017 and 2018 related to the lease arrangement (Suppose Jensen expects the residual value at the end of the lease term to be $40,000 but still guarantees a residual of $50,000. Compute the value of the lease liability at lease cummencement. P21-7 (L02,4) Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is S495,678, and its guaranteed residual value at the end of the non-cancelablle lease term is estimated to be $15,000.The hospital will pay rents of $60,000 at the beginning of cach year Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit inlerest rate is 5 Instructions (a) Discuss the nature of this lease in relation to the lessor and compule the amount of each of the following items (1) Lease receivable at commencement of the lease. (2) Sales price. (3) Cost of sales (b) Prepare a 10-year lease amortization schedule for Amiranle, the lessor (e) Prepare all of the lessor's journal entries for the first year P21-8 (L02,4) (Lessee Computations and Entries, Flnance Lease with Guaranleed Residual Value) Assume the same data as in P21-7 and that Chambers Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000 Instructions al Discuss the nature of this lease in relation to the lessoe, and compule the amount of the inltlal lease llability (b) Prepare a 10-year lease amortization schodule. ) Prepare all of the lesse's journal antries for the first yoar. (4) Suppose Chambers Medical Center incurred 57,000 al document preparation costs after the execution of the letoe, How would the initial measurement of the lunse linblity and right-of-use asset be affected? Expert Q&A Done Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Cjambers Medical Centerfor a period of 10 years. The normal selling price of the machine is $495,678, and its guranteed redidual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year. Amirante incurred costs of $300,000 in manufacturing the medicine and $14,000 in legal fees directly related to the sigining of the lease. Amirante has determind that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. 943396 620794 680162 730087 11.158117 11421 2412 10 19 20 558395 330513 311805 L2,4) (Lessee-Lessor Entries, Finance Lease with a Guaranieed Residual Value) Glaus Leasing Company agrees e oqulpment to Jensen Corporation on January 1,2017. The following information relates to the lease agreement. The teem of the lease is 7 years with no renewal option, and the machinery has an estimated oconomic life ol 9 years 2 The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2017,i $700.000 3. At the end of the lease term, the asset feverts to the lessor and has a guaranteed residual value of $50,000 Jensen estimates that the expected residual value at the end of the lease term will b 550LDO e amortres all of ils keased equipment on a straight-line basis . The lease agreement requires equal annual rental payments, beginning on January 1,2017 The collectiblility of the lease payments is probablc Glaus desires a 5% rate pf return on its investments. Jensen's incremental borowing rate is 6 and the lessor's implicit rate is unknown Instructions (Assume the accounting period ends on December 31) (al Discuss the nature of this lease for both the lessee and the lessor (b) Calculate the amount of the annual rental payment requined. (e) Compute the value of the lease liability to the lesse. (d) Prepare the jounal eniries Jensen would make in 2017 and 2018 related to the lease arrangement (e) Prepare the joumal entries Glaus would make in 2017 and 2018 related to the lease arrangement (Suppose Jensen expects the residual value at the end of the lease term to be $40,000 but still guarantees a residual of $50,000. Compute the value of the lease liability at lease cummencement. P21-7 (L02,4) Lessor Computations and Entries, Sales-Type Lease with Guaranteed Residual Value) Amirante Inc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is S495,678, and its guaranteed residual value at the end of the non-cancelablle lease term is estimated to be $15,000.The hospital will pay rents of $60,000 at the beginning of cach year Amirante incurred costs of $300,000 in manufacturing the machine and $14,000 in legal fees directly related to the signing of the lease. Amirante has determined that the collectibility of the lease payments is probable and that the implicit inlerest rate is 5 Instructions (a) Discuss the nature of this lease in relation to the lessor and compule the amount of each of the following items (1) Lease receivable at commencement of the lease. (2) Sales price. (3) Cost of sales (b) Prepare a 10-year lease amortization schedule for Amiranle, the lessor (e) Prepare all of the lessor's journal entries for the first year P21-8 (L02,4) (Lessee Computations and Entries, Flnance Lease with Guaranleed Residual Value) Assume the same data as in P21-7 and that Chambers Medical Center has an incremental borrowing rate of 5% and an expected residual value at the end of the lease of $10,000 Instructions al Discuss the nature of this lease in relation to the lessoe, and compule the amount of the inltlal lease llability (b) Prepare a 10-year lease amortization schodule. ) Prepare all of the lesse's journal antries for the first yoar. (4) Suppose Chambers Medical Center incurred 57,000 al document preparation costs after the execution of the letoe, How would the initial measurement of the lunse linblity and right-of-use asset be affected