Question

Grichuk Power leased high-tech electronic equipment from Kolten Leasing on January 1, 2018. Kolten purchased the equipment from Wong Machines at a cost of $250,000, its fair value. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Related Information: Lease term 2 years (8 quarterly periods) Quarterly lease payments $15,000 at Jan. 1, 2018, and at Mar. 31, June 30, Sept. 30, and Dec. 31 thereafter. Economic life of asset 5 years Interest rate charged by the lessor 8% Required: Prepare a lease amortization schedule and appropriate entries for Grichuk Power from the commencement of the lease through December 31, 2018. December 31 is the fiscal year end for each company. Appropriate adjusting entries are recorded at the end of each quarter.

Answer #1

Answering this question as per requirement of IFRS 16, which effectively requires the lessee to capitalise all leases except short term lease and leases for low value assets:

Please comment for any questions

Natick Industries leased high-tech instruments from Framingham
Leasing on January 1, 2021. Natick has the option to renew the
lease at the end of two years for an additional three years. Natick
is subject to a $55,000 penalty after two years if it fails to
renew the lease. Framingham Leasing purchased the equipment from
Waltham Machines at a cost of $346,294. (FV of $1, PV of $1, FVA of
$1, PVA of $1, FVAD of $1 and PVAD of $1)...

Manufacturers Southern leased high-tech electronic equipment
from Edison Leasing on January 1, 2016. Edison purchased the
equipment from International Machines at a cost of $125,370. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.)
Related
Information:
Lease term
2 years (8 quarterly
periods)
Quarterly rental
payments
$16,500 at the
beginning of each period
Economic life of
asset
2 years
Fair value of
asset...

Natick Industries leased high-tech instruments from Framingham
Leasing on January 1, 2021. Natick has the option to renew the
lease at the end of two years for an additional three years. Natick
is subject to a $40,000 penalty after two years if it fails to
renew the lease. Framingham Leasing purchased the equipment from
Waltham Machines at a cost of $416,962. (FV of $1, PV of $1, FVA of
$1, PVA of $1, FVAD of $1 and PVAD of $1)...

atick Industries leased high-tech instruments from Framingham
Leasing on January 1, 2021. Natick has the option to renew the
lease at the end of two years for an additional three years. Natick
is subject to a $40,000 penalty after two years if it fails to
renew the lease. Framingham Leasing purchased the equipment from
Waltham Machines at a cost of $153,238. (FV of $1, PV of $1, FVA of
$1, PVA of $1, FVAD of $1 and PVAD of $1)...

Manufacturers Southern leased high-tech electronic equipment
from International Machines on January 1, 2018. International
Machines manufactured the equipment at a cost of $89,000.
Manufacturers Southern's fiscal year ends December 31. (FV of $1,
PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.) Related
Information: Lease term 2 years (8 quarterly periods) Quarterly
rental payments $16,000 at the beginning of each period Economic
life of asset 2...

Chance Enterprises leased equipment from Third Bank Leasing on
January 1, 2018. Third Bank purchased the equipment at a cost of
$1,050,000. Chance elected the short-term lease option. Appropriate
adjusting entries are made annually.
Related Information:
Lease term 1 year (4 quarterly periods)
Quarterly lease payments $42,000 at Jan. 1, 2018, and at Mar.
31, June 30, and Sept. 30.
Economic life of asset 5 years Interest rate charged by the
lessor 6%
Required: Prepare appropriate entries for Chance from...

Manufacturers Southern leased high-tech electronic equipment
from Edison Leasing on January 1, 2018. Edison purchased the
equipment from International Machines at a cost of $112,446. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.)
Related Information:
Lease term
2 years (8 quarterly periods)
Quarterly rental payments
$15,300 at the beginning of each period
Economic life of asset
2 years
Fair value of asset...

Exercise 15-6 (Algo) Finance lease; lessee [LO15-2]
Manufacturers Southern leased high-tech electronic equipment
from Edison Leasing on January 1, 2021. Edison purchased the
equipment from International Machines at a cost of $127,024. (FV of
$1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.)
Related Information:
Lease term
2 years (8 quarterly periods)
Quarterly rental payments
$17,000 at the beginning of each period
Economic life of...

Manufacturers Southern leased high-tech electronic equipment
from International Machines on January 1, 2021. International
Machines manufactured the equipment at a cost of $86,000.
Manufacturers Southern's fiscal year ends December 31. (FV of $1,
PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
(Use appropriate factor(s) from the tables
provided.)
Related Information:
Lease term
2 years (8 quarterly periods)
Quarterly rental payments
$15,000 at the beginning of each period
Economic life of asset
2...

On January 1, 2018, Maywood Hydraulics leased drilling equipment
from Aqua Leasing for a four-year period ending December 31, 2021,
at which time possession of the leased asset will revert back to
Aqua. The equipment cost Aqua $434,644 and has an expected economic
life of five years. Aqua expects the residual value at December 31,
2018, to be $70,000. Negotiations led to Maywood guaranteeing a
$100,000 residual value.
Equal payments under the lease are $140,000 and are due on December...

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