User Account

All Pages

Summarizing the lease payments and interest expense

Assignment Help Accounting Basics
Reference no: EM13143667

The Lotus Corporation signs a lease agreement dated January 1, 2010 that provides for it to lease equipment from Dragon Company beginning January 1, 2010. The lease terms, provisions, and related events are as follows:

The lease is noncancelable and has a term of five years. The annual rentals are $83,222.92, payable at the end of each year, and provide Dragon with a 12% annual rate of raturn on its net investment. The Lotus Corporation agress to pay all executory costs at the end of each year. In 2010, these were insurance, $3,760; property taxes, $5,440. In 2011: insurance, $3,100; property taxes, $5,330. There is no renewal or bargain purchase option.

Lotus estimates that the equipment has a fair value of $300,000, an economic life of five years, and a zero residual value. Lotus' incremental borrowing rate is 16%, it knows the rate implicit in the lease, and it uses the straight-line method to record depreciation on similar equipment.

Required:

1. Calculate the amount of the asset and liability of Lotus Company at the inception of the lease. (Round to the nearest
dollar.)

2. Prepare a table summarizing the lease payments and interest expense.

3. Prepare journal entries on the books of Lotus for 2010 and 2011.

4. Prepare a partial balance sheet in regard to the lease for Lotus for December 21, 2010.

5. If the lease term is three years and the annual payment is $120,000, how would Lotus classify the lease under (a) U.S.GAAP and (b) IFRS?

Reference no: EM13143667

Questions Cloud

Net periodic pension cost reported in the income statement : The net periodic pension cost reported in the income statement for 2011 would be
Consider the meaning of the term ecology : Consider the meaning of the term "ecology." How do the ideas of energy and chemical cycles, community structure, biodiversity and succession fit together to form the basis of the way the natural world works?
Self-actualization. : In your own words, (a) give an overview of humanistic psychology's theory of personality (6 points). Also in your own words (b) describe and explain the humanistic terms self-concept, congruence, unconditional positive regard, and self-actualization.
Calculate test statistic for testing the null hypothesis : Calculate the test statistic for testing the null hypothesis. The slass mean will be not be signfically different from the population mean. What is your decision about the null hypothesis?"
Summarizing the lease payments and interest expense : Calculate the amount of the asset and liability of Lotus Company at the inception of the lease. (Round to the nearest dollar.) Prepare a table summarizing the lease payments and interest expense.
Explain at least two symptoms for each enzyme deficiency : Outline how thiamine is converted into the usable cofactor and what its role is in each of the three enzyme systems. 2. For each of the three enzyme systems.
Discuss the flat and segmented memory models : Discuss the flat and segmented memory models and provide an example
Effect of the contractionary policy on aggregate demand : In the long-run, how would the solution of someone who favoured an active policy approach to an expansionary gap differ from that of someone who favoured a passive approach to policy?
How to support the ceo-s claim : A random sample of 35m of the firm's accountants has a mean workday of 8.2 hours with a standard deviation of 0.5 hour. At α = 0.01, can you support the CEO's claim?

Reviews

Write a Review

Accounting Basics Questions & Answers

  End of the accounting period

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be:

  Violation of the partnership agreement

How might a partner withdrawing in violation of the partnership agreement and without the consent of the other partners be treated? What about a partner who is forced to withdraw?

  Projected ending retained earning balance

Hutch Corporation finished their fiscal year ending March 31, 2010, with $88,000 of net income. They issued dividends of $22,000 at year end. At the end of the year on March 31, 2010, they had a net loss of ($46,000) and did not distribute any div..

  Why is accounting for contributions so critical

Why is accounting for contributions so critical for a not-for-profit entity? For example, what complications can arise if a donor places conditions on a pledged contribution or imposes restrictions on the use of the money by the organization? What..

  Common stock outstanding of landon corporation

On January 1, 2010, Garner Corporation purchased 25% of the common stock outstanding of Landon Corporation for $250,000. During 2010, Landon Corporation reported net income of $80,000 and paid cash dividends of $40,000.

  Prepare an income statement and compute earnings per share

A. Low Carb Diet Supplement, Inc. has two divisions. Division A has a profit of $100,000 on sales of $2,000,000. Division B is only able to make $25,000 on sales of $300,000. Based on the profit margins (returns on sales), which division is superior?

  What is the bond price

The Morrissey Company's bonds mature in seven years, have a par value of $1,000, and make an annual coupon payment of $70. The market interest rate for the bonds is 8.5%. What is the bond's price?

  Social security and medicare

Lana Powell has cumulative earnings of $106,700 at the end of September. In the 1st week in October she earns $2,000. The amount deducted for Social Security and Medicare from her check is: (Assume Social Security rate of 6.2% on $106,800 and Medi..

  Problem related to drop in sales

Company sells a single product at $20 per unit. Sales- 100,000, variable costs $800,000, fixed costs $400,000 If a $4 drop in selling price will boost unit sales by 20% the company will experience:

  How do the transactions in the divorce agreement affect

Arnold and Barbara Cane were divorced in June 2011. Pursuant to the divorce decree, Arnold is obliged to perform as follows.

  What amount would the investment grow in 3 years

Chris Spear invested $11,734 today in a fund that earns 8% compounded annually. To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually?

  Finding out the depreciation expense

Heathlands will use a three-year straight-line method. In the 2005 consolidated income statement, the depreciation expense:

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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