1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Sphinxa [80]
2 years ago
7

Carla VistaInc. leased a new crane to Martinez Construction under a 5-year, non-cancelable contract starting January 1, 2020. Te

rms of the lease require payments of $45,500 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $220,000, and a cost to Carla Vista of $220,000. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Carla Vista and Martinez adjust and close books annually at December 31. Collectibility of the lease payments is probable. Martinez’s incremental borrowing rate is 8%, and Carla Vista’s implicit interest rate of 8% is known to Martinez.
Required:
a. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor.
b. Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming the following amounts:

1. Insurance $500.
2. Taxes $2,000.
3. Maintenance $650.
4. Straight-line depreciation and salvage value $15,000.

c. Discuss what should be presented in the balance sheet, the income statement, and the related notes of both the lessee and the lessor at December 31, 2020.
Business
1 answer:
Marrrta [24]2 years ago
4 0

Answer:

Lessee's Entries:

Rent expense (Dr.) $45,500

Cash (Cr.) $45,500

Lessor's Entries:

1. Property Tax expense (Dr.) $2,000

Maintenance and Repair Expense (Dr.) $650

Insurance Expense (Dr.) $500

Accounts Payable (Cr.) $3,150

2. Depreciation Expense (Dr.) $ 29,285

Accumulated  Depreciation (Cr.) $29,285

3.Cash (Dr.) $45,500

Rent Revenue (Cr.) $45,500

Explanation:

The lease is considered as an operating lease as it does not have bargain purchase option and renewal options. The property ownership is not transferred in this lease.

Depreciation expense:

[ Cost - Salvage Value ] / 7

220,000 - 15000 / 7

You might be interested in
Manufacturers sometimes offer a quantity discount to buyers on what kind of order?
Sergeu [11.5K]
Manufacturers offer discounts usually to large quantity or bulk buyers. this encourages buyers to buy more because the businesses give them an opportunity to save more money. usually, it is the retailers who would buy from manufacturers in bulk orders
6 0
3 years ago
Read 2 more answers
Monsters Incorporated (MI) in ready to launch a new product. Depending upon the success of this product, MI will have a value of
jek_recluse [69]
A and then d i’m pretty sure
7 0
3 years ago
Who is responsible for participating in the discussion at a performance review?
NeX [460]
C is the answer.......
3 0
3 years ago
Read 2 more answers
Session Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-ho
Fofino [41]

Answer:

$6,765

Explanation:

The total cost for job K913 is given by the sum of the costs with manufacturing overhead (fixed and variable), direct materials (M) and direct labor (L).

Since the company uses a predetermined overhead rate based on direct labor-hours, the overhead cost for job K913 is:

O = F+V\\O=\frac{150*\$511,000}{70,000} +150*\$2.10\\O=\$1,410

The total cost for the job is:

C=O+M+L\\C=\$1,410+\$705+\$4,650\\C=\$6,765

The total job cost for Job K913 is closest to $6,765.

8 0
3 years ago
Rapid-Built Homes specializes in low-cost prefabricated, modular homes that can be erected in a mat-ter of days anywhere in the
SOVA2 [1]

Answer:

D, are probably not engaged in intense competitive rivalry

Explanation:

A competitive analysis framework or framework of competitive analysis can be said to be an analysis model that is used to examine a competitor market structure. This in turn helps you to properly prepare or structure your market analysis.

There are about 5 competitive analysis frameworks. They include SWOT(strength Weakness Opportunity Threats), Porter's five forces, Strategic group analysis, growth share matrix, perceptual mapping.

In the case of Rapid-Built Homes and ModMod, they are not exactly involved in intense competitive rivalry because while Rapid-Built homes is a developed by real estate speculators, ModMod is a side business for two architecture professors. This means that selling of housing units by Rapid-Builts is the source of main income for the company while for ModMod, is it not the main source of income for the professors.

Cheers

7 0
3 years ago
Other questions:
  • Salah’s net income for the year ended December 31, Year 2 was $191,000. Information from Salah’s comparative balance sheets is g
    11·1 answer
  • Several years ago, Canadian Sam Holman realized there may be a need for a stronger, more durable wood baseball bat. He went thro
    15·1 answer
  • Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.25 at the end of the year. Its div
    9·1 answer
  • At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says th
    14·1 answer
  • During March 2020, Garner Tool & Die Company worked on four jobs. A review of the direct labour costs reveals the following
    6·1 answer
  • There are distinctive differences between private market and public government operations. Private goods and public goods have d
    15·1 answer
  • A person who earns $30,000 per year has $2,000 in childcare costs. As a
    7·2 answers
  • Read the argument below and determine the underlying principle that was used to come to the conclusion presented: A free college
    9·1 answer
  • What are resources in business studies
    7·1 answer
  • On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie I
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!