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
Andrei [34K]
3 years ago
11

Tamarisk Leasing Company agrees to lease equipment to Vaughn Corporation on January 1, 2020. The following information relates t

o the lease agreement.
1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.
2. The cost of the machinery is $541,000, and the fair value of the asset on January 1, 2020, is $760,000.
3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $45,000. Vaughn estimates that the expected residual value at the end of the lease term will be 45,000. Vaughn amortizes all of its leased equipment on a straight-line basis.
4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020.
5. The collectibility of the lease payments is probable.
6. Tamarisk desires a 10% rate of return on its investments. Vaughn’s incremental borrowing rate is 11%, and the lessor’s implicit rate is unknown.

(Assume the accounting period ends on December 31.)

Click here to view factor tables.

Discuss the nature of this lease for both the lessee and the lessor.

This is a operating leasesales-type leasefinance lease for Vaughn.

This is a sales-type leaseoperating leasefinance lease for Tamarisk.

eTextbook and Media

List of Accounts





Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Annual rental payment
$

eTextbook and Media

List of Accounts





Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)

Present value of minimum lease payments
$

eTextbook and Media

List of Accounts





Prepare the journal entries Vaughn would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit

1/1/2012/31/201/1/2112/31/21

(To record the lease.)

(To record lease payment.)

1/1/2012/31/201/1/2112/31/21

(To record amortization.)

(To record interest.)

1/1/2012/31/201/1/2112/31/21

1/1/2012/31/201/1/2112/31/21

(To record amortization.)

(To record interest.)

eTextbook and Media

List of Accounts





Prepare the journal entries Tamarisk would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit

1/1/2012/31/201/1/2112/31/21
(To record the lease.)

1/1/2012/31/201/1/2112/31/21
(To record lease payment.)

1/1/2012/31/201/1/2112/31/21

1/1/2012/31/201/1/2112/31/21

1/1/2012/31/201/1/2112/31/21
Business
1 answer:
____ [38]3 years ago
7 0

Answer:

1. Finance lease to Vaughn Corporation

Sales-type lease

2. Annual Rental = $ 137,604

3. Lease Liability = $ 741,418

4. Vaughn Corporation.

2020

Jan. 1

Dr Lease Equipment $741,418

Cr Lease Liability $741,418

Jan. 1

Dr Lease Liability $137,064

Cr Cash $137,064

Dec. 31

Dr Depreciation Expense $99,488

Cr Accumulated Depreciation - Finance Lease $99,488

Dec. 31

Dr Interest Expense $66,479

Cr Interest Payable $66,479

2021

Jan. 1

Dr Lease Liability $70,585

Dr Interest Payable $66,479

Cr Cash $137,064

Dec. 31

Dr Depreciation Expense $99,488

Dr Accumulated Depreciation - Finance Lease $99,488

Dec. 31

Dr Interest Expense $58,715

Dr Interest Payable $58,715

5. Tamarisk Leasing Company.

2020

Jan. 1

Dr Lease Receivable $760,000

Dr Cost of Goods Sold $541,000

Cr Sales Revenue $760,000

Cr Inventory $541,000

Jan. 1

Dr Cash $137,064

Cr Lease Receivable $137,064

Dec. 31

Dr Interest Receivable $62,294

Cr Interest Revenue $62,294

2021

Jan. 1

Dr Cash $137,064

Cr Lease Receivable $74,770

Cr Interest Receivable $62,294

Dec. 31

Dr Interest Receivable $54,817

Cr Interest Revenue $54,817

Explanation:

1. Discussion of the nature of this lease for both the lessee and the lessor.

(i) Based on the information given it is a Finance lease to Vaughn Corporation reason been that the term of the lease is higher than 75% of the leased asset economic life based on the fact that the term of the leaseis 78% calculated as (7/9).

(ii) Based on the information given Tamarisk Leasing Company reason been the lease payments can be predictable because their are no uncertainties concerning the costs that is yet to be incurred by the lessor, and secondly the term of the lease is higher than 75% of the asset’s economic life because the amount of $ 760,000 of the equipment is above the lessor’s cost of the amount of $ 541,000 which is why the lease is a Sales-type lease

2. Calculation of Annual Rental Payment

Annual Rental = {FV - (RV * PVF(n=7 years, r=10%))} / PVADF(n=7 years, r=10%)

Annual Rental = {$ 760,000 - ($ 45,000 * 0.51316} / 5.35526

Annual Rental = $ 137,604

3. Calculation of Lease Liability to the Lessee.

First step

Present Value of Annual Payments = $ 137,604 * PVADF(n= 7 years, r=11%)

Present Value of Annual Payments = $ 137,604 *5.23054

Present Value of Annual Payments = $ 719,743

Present Value of Guaranteed Residual Value = $ 45,000 * PVF(n= 7 years, r=11%)

Present Value of Annual Payments = $ 45,000 * .48166

Present Value of Annual Payments = $ 21,675

Hence,

Lease Liability = $ 719,743 + $ 21,675

Lease Liability = $ 741,418

4. Preparation of the Journal Entries for Vaughn Corporation.

2020

Jan. 1

Dr Lease Equipment $741,418

Cr Lease Liability $741,418

Jan. 1

Dr Lease Liability $137,064

Cr Cash $137,064

Dec. 31

Dr Depreciation Expense $99,488

Cr Accumulated Depreciation - Finance Lease $99,488

($ 741418 - $ 45,000) ÷ 7 years

Dec. 31

Dr Interest Expense $66,479

Cr Interest Payable $66,479

($ 741418 - $ 137,064) * 11%

2021

Jan. 1

Dr Lease Liability $70,585

Dr Interest Payable $66,479

Cr Cash $137,064

Dec. 31

Dr Depreciation Expense $99,488

Dr Accumulated Depreciation - Finance Lease $99,488

Dec. 31

Dr Interest Expense $58,715

Dr Interest Payable $58,715

($ 741418 - $ 137,064 - $ 70,585) * 11%

5. Preparation of the Journal Entries for Tamarisk Leasing Company.

2020

Jan. 1

Dr Lease Receivable $760,000

Dr Cost of Goods Sold $541,000

Cr Sales Revenue $760,000

Cr Inventory $541,000

Jan. 1

Dr Cash $137,064

Cr Lease Receivable $137,064

Dec. 31

Dr Interest Receivable $62,294

Cr Interest Revenue $62,294

($ 760,000 - $ 137064) * 10%

2021

Jan. 1

Dr Cash $137,064

Cr Lease Receivable $74,770

Cr Interest Receivable $62,294

Dec. 31

Dr Interest Receivable $54,817

Cr Interest Revenue $54,817

($ 760,000 - $ 137064 - $ 74,770) * 10%

You might be interested in
When the brazilian real changes from 1000 real per u. s. dollar to 1500 real per u. s. dollar, the real is?
Brrunno [24]

When the Brazilian Real changes from 1000 real per U. S. dollar to 1500 Real per U. S. dollar, the real is devalued.

If the Brazilian Real appreciates relative to the U.S.​ dollar, the number of reals furnished increases because the lower fee​ (in real) for U.S. goods induces Brazilians to shop for extra U.S. products.

If an international location's actual trade price is growing, its method of its of goods has become extra costly relative to its competitors. Growth within the actual alternate charge means humans in a country can get more foreign goods for an equal quantity of domestic goods.

While the dollar appreciates, exports lower because they may be now more pricey for foreigners to shop for and imports growth inflicting internet exports to decrease. When the dollar appreciates, exports lower because they're now greater high-priced for foreigners to shop for and imports grow to inflict net exports to decrease.

Learn more about trade here brainly.com/question/17727564

#SPJ4

4 0
2 years ago
*The best answer will receive brainliest, I will friend you, and I will like all of the questions you've asked or answered.
Anastasy [175]

Answer:

The challenges my business would face would be that we would have trouble communicating and producing products. We use the internet so much every day and it is essential in emailing and other methods of communication. We have to communicate with customers, contractors and installers among many others. We also need the internet for sending orders and order designs to the machines that do the cut-outs needed for the products. Production time would slow down dramatically if we were to try to cut out the products on our own or if we were to have to input the designs manually. Communication between different areas would take much more time because we would have to make landline phone calls to them instead of sending out emails. Our drawing staff, the people who create the designs would also have difficulties working. This is because we draw using an online webspace so that it can be easily looked over then transferred to the machines. Drawers would have to create by hand and then walk the design over to the other areas to be produced. Those are some challenged that our company would face if we had to work without power for an entire day.

Explanation:

7 0
2 years ago
Northwest Fur Co. started 2021 with $103,000 of merchandise inventory on hand. During 2021, $560,000 in merchandise was purchase
Naya [18.7K]

Answer:

The cost of goods available for sale is $650,100

Explanation:

Credit terms of 3/15, n/45 means that 3% discount for the payment within 15 days and the full amount to be paid within 45 days.

The discounts Northwest Fur Co. took = $560,000 x 3% = $16,800

Northwest uses a perpetual inventory system and the gross method to record purchases.

Net Purchases = Purchases - Purchase Returns - Purchases Discounts + Freight-In = $560,000 - $4,900 - $16,800 + $8,800 = $547,100

The cost of goods available for sale = Beginning merchandise inventory + Net Purchases = $103,000 + $547,100 = $650,100

4 0
3 years ago
The FTC regulates businesses to prevent price-fixing and similar monopolistic practices. What is the main reason the FTC discour
Irina18 [472]
The answer is B, Monopolies limit competition, which unbalance forces that rregulate the market system
7 0
2 years ago
Read 2 more answers
On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annua
Gnom [1K]

Answer:

$ 11,799 is the principal balance of the note payable.

Explanation:

The  Interest expense for the installment note on the year of the December 31, year can be determined by the following equation that are mention below

= 52,000 * 6.5\ percent

52,000 * \frac{6.5}{100}

= $\ 3,380

Now the Principal balance  of the component in $15,179 payment of the  December 31, year 1  can be determined by the

principal\  and \ interest\ of \ note\ annual\  payments -   Interest\ expense \ for\  the\  installment\   note

= 15,179 -3,380

=$ 11,799

5 0
2 years ago
Other questions:
  • Assume that Plavor Brands, Inc. has 10,000,000 common shares outstanding that have a par value of $2 per share. The stock is cur
    9·1 answer
  • A project is expected to produce cash flows of $12,800, $15,900, and $18,000 over the next 3 years, respectively. After 3 years,
    14·1 answer
  • Mrs. Simpson buys loaves of bread and quarts of milk each week at prices of $1 and 80 cents, respectively. At present she is buy
    9·1 answer
  • The instructions for the OS provided by application software are known as _____.
    6·2 answers
  • A student would like to buy a cross-over SUV from a local dealer, but she thinks the payments will be too high. Marketing does n
    10·1 answer
  • An economy can produce the following combinations of goods: 50X and 0Y, 40X and 10Y, 30X and 20Y, 20X and 30Y, 10X and 40Y, and
    10·1 answer
  • Anita is conducting a country market assessment and is focusing on four key elements: distribution channels, transportation syst
    6·1 answer
  • 30- Which one of the following is an example of business goods?
    10·1 answer
  • Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 6 year
    10·1 answer
  • Charles delivers flowers. He aerns $5.57 to deliever a flower arrangement. Last week he made $746.38. How many arrangements did
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!