Please answer this question, it's for accounting 312. Attached are the questions
Intermediate Accounting 312 Chapter 20 (Leases) Exam Name__________________________________ 1. Raleigh, Inc. leased some equipment from another company on January 1, 2016, for a three-year period. Payments of $45,000 were due each December 31. The lease qualified as a capital lease. Assets were depreciated over the life of the lease, using the straight-line method. The appropriate interest rate to use was 9%. Required: (For all answers, round to the nearest dollar.) a. Prepare all December 31, 2016, journal entries required on Raleigh's books (10 points). b. At December 31, 2016, how much of the lease liability should be shown as current (2 points)? c. If the first $45,000 payment was due January 1, 2016, what journal entries would be required on Raleigh's books on January 1, 2016 (8 points)? d. Assume instead that the $45,000 payments are made on December 31. Assume, in addition, that at the end of three years, the lessee guaranteed a residual value of $10,000. Compute the amount of the lease obligation that should be recorded on January 1, 2016. e. Refer to Part d. Assume that on December 31, 2018, the leased equipment had a fair value of only $6,500. Prepare all December 31, 2018, journal entries for the lessee (10 points). 1. South Bend Corporation purchased equipment in December 2016 for $150,000. South Bend leased the equipment to the Kansas Company on January 1, 2017. Lease payments of $43,000 are to be made at the end of each year for six years. The present value of the minimum lease payments at 14% interest is $167,212.72 at the time of the lease. At the end of the lease term, ownership of the equipment will be transferred to Kansas. The collectibility of the lease payments is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Required: a. Classify the lease (be specific) from the South Bend Corporation's standpoint (6 points). b. Prepare the 2017 journal entries regarding the lease for the South Bend Corporation (9 points). BONUS 2. Maher has entered into a lease agreement with Johanson Company on January 1, 2017. 1) The lease reverts back to Johanson Company at the end of the lease. Johanson does not offer a bargain purchase option. 2) The term of the lease is 6 years and requires annual payments of $12,000 at the end of the year. 3) The present value of the lease payments is $52,263 using an incremental rate of 10%, the equipment's fair value at lease inception is $62,500. 4) The equipment has an estimated life of 12 years. Required: 1) Using the four classification criteria determine whether the lease qualifies as an operating or capital lease for Maher (6 points). 2) Prepare the journal entries that Maher would make for 2017 and 2018 (4 points)
