Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION 3 Use the information below to answer questions 3, 4, and 5 On December 31, 2020, Gold Inc. signed a lease with Silver Leasing

QUESTION 3

Use the information below to answer questions 3, 4, and 5

On December 31, 2020, Gold Inc. signed a lease with Silver Leasing Co. for Olympic medal-making equipment having a seven-year useful life. The lease payments are made by Gold annually, beginning at the signing date. The title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2026. There is no purchase option, and Gold Inc guarantees a residual value to the lessor on termination of the lease.

Reagan's lease amortization schedule appears below:

Dec. 31

Payments

Interest

Decrease in

Balance

Outstanding

Balance

2020

$

519,115

2020

$

90,000

$

90,000

429,115

2021

$

90,000

$

17,165

72,835

356,280

2022

$

90,000

14,251

75,749

280,531

2023

$

90,000

11,221

78,779

201,752

2024

$

90,000

8,070

81,930

119,822

2025

$

90,000

4,793

85,207

34,615

2026

$

36,000

1,385

34,615

0

In this situation, Gold:

is the lessee in a sales-type lease.

is the lessee in a finance lease.

is the lessor in a finance lease.

is the lessor in a sales-type lease.

3 points

QUESTION 4

What is the balance of the lease liability on Gold's December 31, 2024, balance sheet?

$280,531.

$190,530.

$119,822

$356,280.

3 points

QUESTION 5

At what amount would Gold record the right-of-use asset at the beginning of the agreement?

$519,115.

$429,115.

$540,000.

It is not recorded as a right of use asset

3 points

QUESTION 6

Which of the following statements characterizes an operating lease?

The lessee reports cash outflows as financing activities.

The lessor records depreciation and lease revenue.

The lessor transfers title at the end of the lease term.

The lessee has an option to purchase the leased assets and is reasonably sure to exercise the option.

2 points

QUESTION 7

When a finance lease is first recorded at the beginning of the lease, the lessee will debit:

Right-of-use asset.

Rent expense.

Lease expense.

Lease receivable.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Structured Edp Auditing

Authors: Gabriel Rothberg

1st Edition

0534979319, 978-0534979317

More Books

Students also viewed these Accounting questions

Question

Define Management or What is Management?

Answered: 1 week ago

Question

What do you understand by MBO?

Answered: 1 week ago

Question

Describe the linkages between HRM and strategy formulation. page 74

Answered: 1 week ago

Question

Identify approaches to improving retention rates.

Answered: 1 week ago