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Use the information in RE21-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of $200,000.In RE21-3, Garvey Company (the lessee) entered into an equipment lease with Richie Company (the lessor) on January 1 of Year 1. Use the following information to decide whether this lease qualifies as an operating or capital lease for Garvey, and give an explanation using the four classification criteria.
1. The equipment reverts back to the lessor at the end of the lease, and there is no bargain purchase option.2. The lease term is five years and requires Garvey to make annual payments of $65,949.37 at the end of each year.3. The discount rate is 10%, which is implicit in the lease. Garvey knows this, and this rate is lower than its incremental borrowing rate.4. The fair value of the equipment at the lease inception is $250,000. The present value of an ordinary annuity of five payments of $65,949.37 each at 10% is $250,000.5. The equipment has an estimated economic life of seven years and has zero residual value at the end of this time. Straight-line depreciation is used for similar assets.
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Where on the balance sheet would the account balance representing funds Received for games not yet played be classified? Assume that The Defiance College follows the same accounting and financial reporting procedures that are used in business.
A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4) and $6,000 (year 5). The payback period is..
Mark Hancock is a self employed attorney who operates his law practice as an unincorporated sole proprietorship. In 2010, the IRS disallowed several business deductions he took in 2007 and 2008. In addition to paying the deficiency and assessed pe..
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Toth chose to upgrade to a premium model in January 2007 and sold the old plotter to dunn drafting for $2,500. Prepare the journal entry recording for this sale of old plotter.
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