Question

If the leaseback portion of a sale-leaseback transaction meets the criteria to be a finance lease:...

If the leaseback portion of a sale-leaseback transaction meets the criteria to be a finance lease:

Multiple Choice

The seller-lessee will record a right-of-use asset.

The seller-lessee will record interest revenue.

The seller-lessee will record a gain or loss on the sale of an asset.

The seller-lessee will record a note payable.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Correct answer is D -seller lesse will record note payable.

Since it is a financial lease where seller becomes lesse and purchaser lessor

Seller lesse has to pay lease payments over a period of time which will be recorded as note payable.

However seller assesee cannot immediately record gain/loss on sale of asset in case of financial lease. Nd right to use is recorded in case of operating lease .

So the correct answer is D.

Do give your feedback!! Happy Learning :)

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
Barry Limited (lessee) entered into a finance lease agreement with the following terms: lease term is...
Barry Limited (lessee) entered into a finance lease agreement with the following terms: lease term is 4 years estimated economic life of the leased asset (equipment) is 5 years Right of use asset amount at the inception was $85,695 Annual lease payments of $30,000 each payable in advance. residual value at the end of the lease term is $5,000 but no amount was guaranteed by the lessee Which one of the following is correct for Barry Limited? Select one: Depreciation...
In a finance lease: Multiple Choice the lessee records an asset and a liability for the...
In a finance lease: Multiple Choice the lessee records an asset and a liability for the present value of lease payments. the lessor records an asset and a liability for the present value of lease payments. the lessee records an asset and a liability for the total of the lease payments. the lessor records an asset and a liability for the total of the lease payments.
Lessee leased a machine from Lessor under a 10-year, noncancelable lease. The transaction was properly classified...
Lessee leased a machine from Lessor under a 10-year, noncancelable lease. The transaction was properly classified as a finance lease, and a right-of-use asset and a lease liability of $100,000 were recorded. The $14,900 annual payments made at the end of each lease period were discounted at 8% implicit interest to derive the initial $100,000 amounts. Lessee should record the following interest expense at the end of Years 1 and 2: Please show solution Year 1 Year 2 A. $8,000...
Recording Finance Lease Journal Entries— Purchase Option Lessee Company enters into a 6-year finance lease of...
Recording Finance Lease Journal Entries— Purchase Option Lessee Company enters into a 6-year finance lease of non-specialized equipment with Lessor Company on January 1, 2020. Lessee has agreed to pay $28,000 annually beginning immediately on January 1, 2020. The lease includes an option for the lessee to purchase the equipment at $3,000, which is $2,000 below the estimated fair value at lease end. Lessee Company is reasonably certain that it will exercise the purchase option. The economic life of the...
Franklin, Inc. leased equipment from Juniper Co. on December 31, 2018. The lease meets the criteria...
Franklin, Inc. leased equipment from Juniper Co. on December 31, 2018. The lease meets the criteria of a finance lease under the new lease accounting standard. The lease requires annual payments of $150,000 due on December 31 of each year, beginning December 31, 2018. The present value of the lease payments is $1,020,000. The interest rate implicit in the lease is 8%. Of the payment due on December 31, 2019, how much will Franklin record as interest expense? (Round to...
Each of the three independent situations below describes a finance lease in which annual lease payments...
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the beginning of each year. The lessee is aware of the lessor's implicit rate of return. (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.) Situation 1 2 3 Lease term (years) 11 21 5 Lessor's rate of return (known by lessee) 10% 8%...
Each of the three independent situations below describes a finance lease in which annual lease payments...
Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. (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.) Situation 1 2 3 Lease term (years) 10 15 5 Lessor's rate of return (known by lessee) 12% 10%...
Example – sale and leaseback Entity X sells a building to entity Y for cash of...
Example – sale and leaseback Entity X sells a building to entity Y for cash of $5 million. Immediately before the transaction, the carrying amount of the building in the financial statements of entity X was $3.5 million. At the same time, X enters into a contract with Y for the right to use the building for 20 years, with annual payments of $200,000 payable at the end of each year. The terms and conditions of the transaction are such...
At the beginning of current year, ABC sold a building and immediately lease it back. The...
At the beginning of current year, ABC sold a building and immediately lease it back. The following data pertain to the sale and leaseback transaction: Sale price at above fair value                                                        9,000,000 Fair value of building                                                                     8,000,000 Carrying amount of building                                                         7,200,000 Annual rental payable at the end of each year                              600,000 Remaining life of building                                                             20 years Lease term                                                                                   4 years Implicit interest rate                                                                    12% PV of an ordinary annuity of 1 at 12% for 4 periods                      3.037 REQUIRED:...
Exercise 15-10 (Algo) Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-2]...
Exercise 15-10 (Algo) Lessor calculation of annual lease payments; lessee calculation of asset and liability [LO15-2] Each of the three independent situations below describes a finance lease in which annual lease payments are payable at the end of each year. The lessee is aware of the lessor’s implicit rate of return. (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.) Situation 1 2...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT