Determining the type of lease arrangement

Assignment Help Financial Accounting

Reference no: EM131206459

On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an estimated useful life of 6 years and a $7,000 unguaranteed residual value. The delivery vehicle reverts back to the lessor at the end of the lease term. ABC Corporation uses the straight-line method of depreciation for the delivery vehicle. ABC Corporation's incremental borrowing rate is 10%, and the Lessor's implicit rate is unknown. No entries have yet been made concerning this lease arrangement. After determining the type of lease arrangement (capital or operating), prepare the necessary multiple-part journal entry for 2014 for ABC Corporation. (Hints: You will need to compute the present value of the minimum lease payments and 4 separate sub-entries for this lease transaction. Also, for Statement of Cash Flow purposes, the principal portion of lease payments are correctly categorized as a financing activity.)

Reference no: EM131206459

Questions Cloud

Under the periodic method : Under the periodic method, inventory is just counted at the end of the year. Under the perpetual method, inventory is adjusted throughout the year as sales and purchases are made. Under the perpetual method, when might the inventory balance on the bo..

Difference between temporary and permanent accounts : In your own words explain the difference between temporary and permanent accounts; give an example of each Where do they each appear on the Financial Statements? How are the Financial Statements - Income Statement, Equity Statement, Balance Sheet and..

Which account balances that might be estimated : After reading the suggested chapters for this week, review the balance sheet of a large publicly traded company and determine whether this company might be a company in which you would like to invest. What are the specific accounts on the balance she..

Prepare retained earnings statement for fiscal year ended : Sumter Pumps Corporation, a manufacturer of industrial pumps, reports the following results for the year ended January 31, 2016: Prepare a retained earnings statement for the fiscal year ended January 31, 2016. Refer to the lists of Labels and Amount..

Determining the type of lease arrangement : ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make annual payments of $10,503 at the beginning of each year, starting January 1, 2014. The delivery vehicle has an e..

Service department charges : The centralized employee travel department of Camtro Company has expenses of $528,000. The department has serviced a total of 6,000 travel reservations for the period. The Southeast Division has made 2,400 reservations during the period, and the Paci..

Describes the possible impact social audit : Which of the following statements best describes the possible impact a social audit can have on company costs? Which of the following is least important in becoming an employer of choice?

An investment trust fund should be used when : An investment trust fund should be used when:

Compute the rate of return on investment : Profit Margin, Investment Turnover, and ROI Cash Company has income from operations of $112,500, invested assets of $750,000, and sales of $1,875,000. Use the DuPont formula to compute the rate of return on investment.

User Account

All Pages