How should this lease be classified by jefferson

Assignment Help Accounting Basics
Reference no: EM131702596

A. JEFFERSON COMPANY

On December 31, 2013, Jefferson Company leased a delivery truck from Branch Motors. Branch paid $35,000 for the truck. Its retail value is $37,731.

The lease agreement specified annual payments of $10,000 beginning December 31, 2013, the inception of the lease, and at each December 31 through 2016. Branch Motors' interest rate for determining payments was 11%, which has been communicated to Jefferson Company. At the end of the four-year lease term (December 31, 2017) the truck was expected to be worth $5,000, none of which is guaranteed. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line depreciation. Jefferson's incremental borrowing rate is 12%.

Collectibility of the lease payments by Jefferson Company is reasonable predictable and there are no costs to the lessor that are yet to be incurred.

Required:

1. How should this lease be classified by Jefferson (the lessee)? Why?

2. How should this lease be classified by Branch Motors (the lessor)? Why?

3. Prepare the appropriate entries for both Jefferson and Branch Motors on December 31, 2013 (the inception of the lease).

4. Prepare the appropriate entries for both Jefferson and Branch Motors on December 31, 2014.

Reference no: EM131702596

Questions Cloud

Create a diary for christopher columbus : Create a diary for Christopher Columbus. Your entries should span the course of his life and offer a look at the changes in fortune he experienced.
Possible advantages to corporation in voluntarily agreeing : A European labor union succeeded in organizing the workers at a facility in Germany that was owned and operated by a U.S.-headquartered and incorporated.
What do you think caused this shift in jazz from popular art : Jazz music was America's most popular radio and dance club genre from the 1920s-40s. In the 1950s, its popularity began to dwindle.
What is the net advantage to leasing : The annual depreciation tax shield is $4,307 and the after-tax annual lease payment is $9,240. What is the net advantage to leasing.
How should this lease be classified by jefferson : On December 31, 2013, Jefferson Company leased a delivery truck from Branch Motors. How should this lease be classified by Jefferson (the lessee)? Why
Value of the put option on cola company : What is the value of the put option on Cola Company with the same exercise price and maturity date?
Mobile application of engagement-based technology : Research a mobile application of engagement-based technology from a global sense.
Assess the strengths and weaknesses of divine command theory : Assess the strengths and weaknesses of Divine Command Theory. Give a strong, well-supported argument in favor of DCT for ethical decision-making.
How the host country military fulfills a national agreement : What must the U.S. try to show in order to successfully defend itself? Should the law impose an obligation on the oil company to "police".

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd