Question

On December 31, 2019, JB Corporation signed a 6-year, non-cancelable lease for a machine. The terms of the lease called for JB to make annual payments of $12,108 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 8 years and a $6,000 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. JB uses the straight-line method of depreciation for all of its plant assets. JB’s incremental borrowing rate is 8%, and the lessor’s implicit rate is unknown.

**Instructions:**

(Round all numbers to the nearest dollar.)

(a) What type of lease is this? Explain.

(b) Compute the present value of the lease payments.

(c) Prepare all necessary journal entries for JB for this lease
through December 31, 20 .

Answer #1

On December 31, 2016, Sage Hill Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Sage Hill to make annual payments of $8,026 at the beginning of
each year, starting December 31, 2016. The machine has an estimated
useful life of 6 years and a $4,900 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Sage Hill uses the straight-line method of depreciation for
all...

On December 31, 2016, Tamarisk Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Tamarisk to make annual payments of $8,978 at the beginning of
each year, starting December 31, 2016. The machine has an estimated
useful life of 6 years and a $5,200 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Tamarisk uses the straight-line method of depreciation for
all of its plant...

On December 31, 2019, Teal Mountain Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Teal Mountain to make annual payments of $8,200 at the
beginning of each year, starting December 31, 2019. The machine has
an estimated useful life of 6 years and a $5,500 unguaranteed
residual value. The machine reverts back to the lessor at the end
of the lease term. Teal Mountain uses the straight-line method of
depreciation for all...

On December 31, 2016, Sage Hill Corporation signed a 5-year,
non-cancelable lease for a machine. The terms of the lease called
for Sage Hill to make annual payments of $9,110 at the beginning of
each year, starting December 31, 2016. The machine has an estimated
useful life of 6 years and a $5,000 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Sage Hill uses the straight-line method of depreciation for
all...

On January 1, 2017, Windsor Corporation signed a 5-year
noncancelable lease for a machine. The terms of the lease called
for Windsor to make annual payments of $8,634 at the beginning of
each year, starting January 1, 2017. The machine has an estimated
useful life of 6 years and a $4,900 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Windsor uses the straight-line method of depreciation for all
of its plant...

Exercise 21-1
On January 1, 2017, Kingbird Corporation signed a 5-year
noncancelable lease for a machine. The terms of the lease called
for Kingbird to make annual payments of $8,199 at the beginning of
each year, starting January 1, 2017. The machine has an estimated
useful life of 6 years and a $5,200 unguaranteed residual value.
The machine reverts back to the lessor at the end of the lease
term. Kingbird uses the straight-line method of depreciation for
all of...

On 1 July 2019, Cars Limited signed a 7-year non-cancelable
lease for equipment that requires equal rental payment of
$3,500,000 at the beginning of each year. The equipment has a fair
value at the inception of the lease of $15,000,000, an estimated
useful life of 10 years and no residual value. The lease does not
transfer title or contain a bargain-purchase option. The Cars
Limited’s incremental borrowing rate is 15% and PVIFA (n=7, i=15%)
is 4.1604.
Required Indicate and explain...

Please answer all a,b,c!
Eubank Company, as lessee, enters into
a capitalized lease agreement on January 1, 2018,
for equipment. The following data are relevant to the lease
agreement:
The term of the non-cancelable lease is 4 years with no renewal
option. Payments of $782,757 are made at the beginning of each
year. The present value of the minimum lease payments equals
$2,800,000.
The fair value of the equipment on 1/1/18 is $2,800,000. The
equipment has an economic life of...

Indiana Jones Corporation enters into a 6-year lease of
equipment on December 31, 2019, which requires 6 annual payments of
$40,000 each, beginning December 31, 2019. In addition, Indiana
Jones guarantees the lessor a residual value of $20,000 at the end
of the lease. However, Indiana Jones believes it is probable that
the expected residual value at the end of the lease term will be
$10,000. The equipment has a useful life of 6 years. Assume that
for Lost Ark...

eal Corporation enters into a 7-year lease of equipment on
December 31, 2019, which requires 7 annual payments of $41,100
each, beginning December 31, 2019. In addition, Teal guarantees the
lessor a residual value of $18,400 at the end of the lease.
However, Teal believes it is probable that the expected residual
value at the end of the lease term will be $9,200. The equipment
has a useful life of 7 years.
Prepare Teals' December 31, 2019, journal entries assuming...

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