Question

Peters Company leased a machine from Johnson Corporation on January 1, 2018. The machine has a...

Peters Company leased a machine from Johnson Corporation on January 1, 2018. The machine has a fair value of $17,000,000. The lease agreement calls for three equal payments at the end of each year. The useful life of the machine was expected to be three years with no residual value. The appropriate interest rate for this lease is 12%. Other information: PV of an ordinary annuity @12% for 3 periods: 2.40183 PV of an annuity due @12% for 3 periods: 2.69005

Required

: 1. Determine the amount of each lease payment.

2. 3. & 4. Prepare the appropriate journal entry.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
1 Determine the amount of each lease payment
Fair Value of machine/PV of an ordinary annuity
17000000/2.40183
7077936.407
2 Leased asset 17000000
To Lease Payable 17000000
3 Interest Expense 2040000 12%*17000000
Lease Payable 5037936
To Cash 7077936
4 Interest expense 1435448 12%*(17000000-5037936)
Lease payable 5642489
To Cash 7077936
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a...
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a fair value of $26,000,000. The lease agreement calls for four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for this lease is 12%. Other information: PV of an ordinary annuity @12% for 4 periods: 3.03735 PV of an annuity due @12% for 4 periods:...
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a...
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a fair value of $15,000,000. The lease agreement calls for four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for this lease is 12%. Other information: PV of an ordinary annuity @12% for 4 periods: 3.03735 PV of an annuity due @12% for 4 periods:...
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a...
Peters Company leased a machine from Johnson Corporation on January 1, 2021. The machine has a fair value of $29,000,000. The lease agreement calls for four equal payments at the end of each year. The useful life of the machine was expected to be four years with no residual value. The appropriate interest rate for this lease is 10%. Other information: PV of an ordinary annuity @10% for 4 periods: 3.16987 PV of an annuity due @10% for 4 periods:...
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement...
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement calls for annual payments in the amount of $17,500 on December 31 of each year beginning on December 31, 2018. Rumsfeld has the option to purchase the machine on December 31, 2021, for $21,500 when its fair value is expected to be $31,500. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this...
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement...
Rumsfeld Corporation leased a machine on December 31, 2018, for a three-year period. The lease agreement calls for annual payments in the amount of $14,000 on December 31 of each year beginning on December 31, 2018. Rumsfeld has the option to purchase the machine on December 31, 2021, for $15,500 when its fair value is expected to be $25,500. The machine's estimated useful life is expected to be four years with no residual value. The appropriate interest rate for this...
Rumsfeld Corporation leased a machine on December 31, 2021, for a three-year period. The lease agreement...
Rumsfeld Corporation leased a machine on December 31, 2021, for a three-year period. The lease agreement calls for annual payments in the amount of $15,000 on December 31 of each year beginning on December 31, 2021. Rumsfeld has the option to purchase the machine on December 31, 2024, for $16,000 when its fair value is expected to be $26,000. The machine's estimated useful life is expected to be five years with no residual value. The appropriate interest rate for this...
Eastern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Other information: Lease term...
Eastern Edison Company leased equipment from Hi-Tech Leasing on January 1, 2018. Other information: Lease term 4 years Annual payments $86,000 on January 1 each year Life of asset 4 years Implicit interest rate 9% PV, annuity due, 4 periods, 9% 3.5313 PV, ordinary annuity, 4 periods, 9% 3.2397 Hi-Tech's cost of the equipment $303,692 There is no expected residual value. Required: Prepare appropriate journal entries for Hi-Tech Leasing for 2018 and 2019. Assume a December 31 year-end. (If no...
American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton...
American Food Services, Inc., leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2018. The lease agreement for the $5.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton’s implicit interest rate was 11%. (FV of $1, PV...
Federated Fabrications leased a tooling machine on January 1, 2018, for a three-year period ending December...
Federated Fabrications leased a tooling machine on January 1, 2018, for a three-year period ending December 31, 2020. The lease agreement specified annual payments of $36,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2019. The company had the option to purchase the machine on December 30, 2020, for $45,000 when its fair value was expected to be $60,000, a sufficient difference that exercise seems reasonably certain. The Machine's estimated useful life...
On January 1, 2021, Girardi Company leased several machines from Cole Corporation under a 3-year operating...
On January 1, 2021, Girardi Company leased several machines from Cole Corporation under a 3-year operating lease agreement. The lease calls for semiannual payments of $15,000 each, payable on June 30 and December 31 of each year. The machines were acquired by Cole at a cost of $90,000 and are expected to have a useful life of 5 years with no expected residual value. Required: Prepare the appropriate journal entries for the lessor from the inception of the lease through...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT