Reference no: EM132763038
Question - On December 31, 2018, Yard Art Landscaping leased a delivery truck from Branch Motors. Branch paid $36,000 for the truck. Its retail value is $49,355.
The lease agreement specified annual payments of $13,000 beginning December 31, 2018, the beginning of the lease, and at each December 31 through 2021. Branch Motors' interest rate for determining payments was 10%. At the end of the four-year lease term (December 31, 2022) the truck was expected to be worth $11,000. The estimated useful life of the truck is five years with no salvage value. Both companies use straight-line amortization or depreciation.
Yard Art guaranteed a residual value of $7,000. Yard Art's incremental borrowing rate is 7% and is unaware of Branch's implicit rate.
A $1,000 per year maintenance agreement was arranged for the truck with an outside service firm. As an expedient, Branch Motors agreed to pay this fee. It is, however, reflected in the $13,000 lease payments.
Required -
1. How should this lease be classified by Yard Art Landscaping (the lessee)?
2. Calculate the amount Yard Art Landscaping would record as a right-of-use asset and a lease liability.
3. How should this lease be classified by Branch Motors (the lessor)?
4. Show how Branch Motors calculated the $13,000 annual lease payments.
5. Calculate the amount Branch Motors would record as sales revenue.
6. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2018.
7. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Yard Art.
8. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Branch Motors.
9. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2019.
10. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2021 (the final lease payment).
11. Prepare the appropriate entries for both Yard Art and Branch Motors on December 31, 2022 (the end of the lease term), assuming the truck is returned to the lessor and the actual residual value of the truck was $5,000 on that date.
|
How much is Franco adjusted basis in the LLC interest
: How much is Franco's adjusted basis in the LLC interest after the distribution, and what is the amount of his basis in the equipment received
|
|
Find what is the return on levered equity
: A new business requires a $20,000 investment today, and will generate a one-time cash flow of $25,000, what is the return on levered equity?
|
|
Predict the most probable decay series
: Using the interactive nuclide chart, predict the most probable decay series of the following
|
|
Explain free cash flow vs the cash flows displayed
: What are the differences between free cash flow and the cash flows displayed in statement of cash flows? Why do financial professionals like to use free cash?
|
|
Prepare the appropriate entries for both Yard Art
: A $1,000 per year maintenance agreement was arranged for the truck with an outside service firm. Prepare the appropriate entries for both Yard Art
|
|
Determine the number of significant digits
: Determine the number of significant digits in each number and write out the specific significant digits.
|
|
Find how much will pay for the bond if purchased the bond
: Assume that today's date is April 15, 2015. Fresh Bakery Inc. bond is an annual-coupon. How much you will pay for the bond if you purchased the bond today?
|
|
Equation for the formation of ethyl propanoate
: a) Write the word equation for the formation of ethyl propanoate
|
|
Prepare march journal entry to record warranty repairs
: The Net Department Store sold a computer for $3,500 with a one-year warranty that covers parts, Prepare March journal entry to record warranty repairs
|