Question

On January 1, 2021, Jack leased a catnip processing factory for a 4-year period ending December...

On January 1, 2021, Jack leased a catnip processing factory for a 4-year period ending December 31, 2024, at which time possession of the machine will revert back to Luna. The machine cost Luna $450,000 and has an expected useful life of 5 years. Luna expects the residual value to be $55,000 at the end of the lease. Jack told Luna that he would try to assure that this residual value is met. Annual payments of $161,150 are due every January 1. Luna's expected rate of return on the lease is 5%, which Jack does not know. Jack's incremental borrowing rate is 8%. Luna and Jack use straight line depreciation. Prepare the amortization schedules and all journal entries for both Luna and Jack.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period...
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $424,537 and has an expected economic life of five years. Aqua expects the residual value at December 31, 2024, to be $61,000. Negotiations led to Maywood guaranteeing a $86,500 residual value. Equal payments under the lease are $122,000 and are due on December...
On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending...
On January 1, 2018, Nguyen Electronics leased equipment from Nevels Leasing for a four-year period ending December 31, 2018, at which time possession of the leased asset will revert back to Nevels. The equipment cost Nevels $824,368 and has an expected economic life of five years. Nevels expects the residual value at December 31, 2018, will be $100,000. Negotiations led to the lessee guaranteeing a $140,000 residual value. Equal payments under the lease are $200,000 and are due on December...
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...
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December...
Federated Fabrications leased a tooling machine on January 1, 2021, for a three-year period ending December 31, 2023. The lease agreement specified annual payments of $32,000 beginning with the first payment at the beginning of the lease, and each December 31 through 2022. The company had the option to purchase the machine on December 30, 2023, for $41,000 when its fair value was expected to be $56,000, a sufficient difference that exercise seems reasonably certain. The machine's estimated useful life...
On January 1, James Industries leased equipment to a customer for a five-year period, at which...
On January 1, James Industries leased equipment to a customer for a five-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $810,000 and has an expected useful life of seven years. Its normal sales price is $810,000. The residual value after five years is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate...
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 $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:...
On January 1, 2018, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period...
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...
On Jan 1, 2017, Hudson leased a construction crane to Omega, Inc. for a nine year...
On Jan 1, 2017, Hudson leased a construction crane to Omega, Inc. for a nine year period at which time possession of the leased asset will revert back to Hudson. the cost and the fair value of the cranes is $420,000 and its expected useful life is ten years. Hudson expects a residual value of 20,000 for the equipment, but Omega does not guarantee any specific amount. Equal Payments under the lease are 60,000 and are due on Jan 1st...
On January 1, 2018, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year...
On January 1, 2018, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2021, at which time possession of the leased asset will revert back to Allied. The equipment cost Allied $956,000 and has an expected useful life of five years. Allied expects the residual value at December 31, 2022, will be $300,000. Negotiations led to the lessee guaranteeing a $340,000 residual value. (FV of $1, PV of $1, FVA of $1, PVA...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT