Reference no: EM13752029
Lessee accounting—capital lease. Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The following data are relevant to the lease agreement:
1. The term of the non cancelable lease is 4 years, with no renewal option. Payments of $782,757 are due on July 1 of each year.
2. The fair value of the equipment on July 1, 2014 is $2,800,000. The equipment has an economic life of 6 years with no salvage value.
3. Eubank depreciates similar machinery it owns on the sum-of-the-years’-digits basis.
4. The lessee pays all executor costs.
5. Eubank’s incremental borrowing rate is 10% per year. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease payments (present value factor for 4 periods at 8%, 3.57710; at 10%, 3.48685.
Instructions
(a) Indicate the type of lease Eubank Company has entered into and what accounting treatment is applicable.
(b) Prepare the journal entries on Eubank’s books that relate to the lease agreement for the following dates: (Round all amounts to the nearest dollar. Include a partial amortization schedule.)
1. July 1, 2014.
2. December 31, 2014.
3. July 1, 2015.
4. December 31, 2015.
|
Assume a cost of capital and value the firm
: Here are the projected cash flows for the firm for the next 3 years, which are expected to be high growth years (with a growth rate of 10%), and for year 4, which is assumed to be the first year of stable growth (when the growth rate is expected to d..
|
|
What will johns dream house cost when he retires
: While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $200,000. The only catch is that John is 40 years old and plans to continue working until he is 65. Still, he believes that prices gener..
|
|
How information systems can positively impact a change
: Reflects how Information Systems can positively impact a change work processes in healthcare, and Provide a review the obstacles to implementing this change work process in an organization
|
|
Analyze one or two key aspects of management
: You should analyze one or two key aspects of management (e.g., culture, social responsibility, innovation management, leadership, motivation, etc.) using the frameworks and theories discussed in the course, with special emphasis on how the organiz..
|
|
Lessee accounting-capital lease
: Lessee accounting—capital lease. Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment. The following data are relevant to the lease agreement:
|
|
Sources of systematic risk
: Problem: Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums.
|
|
How would these transactions differ with a periodic versu
: What are the journal entries a merchandising organization would use to record the purchase and subsequent sale of merchandise?How would these transactions differ with a periodic versus a perpetual inventory system?
|
|
First financial auto loan department
: First Financial Auto Loan Department wishes to know the payment required at the first of each month on a $10,500, 48-month, 11% auto loan. To determine this amount, First Financial would
|
|
Receives sales tax returns and related payments
: Idaho Falls maintains its books and records in a manner that facilitates the preparation of fund financial statements. Prepare all necessary journal entries to record the following events for the year ended December 31, 2014.
|