Prepare the journal entries on the books of luv company-the

Reference no: EM13600432

Luv Company enters into a non-cancelable lease agreement with Soap Company. The details of the agreement are as follows:

Inception date	Jan 1, 2011
Annual lease payment at beginning of each year, starting Jan 1, 2011	$18,000
Bargain-purchase option at the end of the lease	$4,000
Lease term	5 years
Economic life of leased equipment	5 years
Lessor's cost	$60,000
Fair value of asset	$70,000
Lessor's implicit rate	10%
Lessee's implicit rate	10%
Present value of annuity due i=10%, n=5 periods	4.16987
Present value i=10%, n=5 years	0.621

Soap company will receive the lease payments. The collectability of the lease payments is reasonably predictable and there are no uncertainties surrounding the costs to be incurred by Soap company-the lessor.

For Luv company-the lessee-what is the nature of the lease? What tests does it meet?
For Soap company-the lessor-what is the nature of the lease?
Prepare the amortization schedule for Luv Company for the 5-year term.
Prepare the journal entries on the books of Luv company-the lessee-for recording the lease and the recording of lease payment and expenses for 2011.

Reference no: EM13600432

Questions Cloud

During 2007 federal express reported the following : during 2007 federal express reported the following information in millions net sales of 35214 and net income of 2016.

On financial basis alone should z pty ltd choose to : 2011 costsdirect material cost per item 180direct manufacturing labor per item 50variable manufacturing costs per batch

On january 4 2010 dunbar company purchased on credit 2000 : on january 4 2010 dunbar company purchased on credit 2000 television sets at 500 each. terms of the purchase were 210

At the end of the current year accounts receivable has a : at the end of the current year accounts receivable has a balance of 1400000 allowance for doubtful accounts has a debit

Prepare the journal entries on the books of luv company-the : luv company enters into a non-cancelable lease agreement with soap company. the details of the agreement are as

At the end of the current year accounts receivable has a : at the end of the current year accounts receivable has a balance of 1400000 allowance for doubtful accounts has a debit

A building acquired at the beginning of the year at a cost : q 1 a building acquired at the beginning of the year at a cost of 485000 has an estimated residual value of 75000 and

Identify these events as asset source as asset use au asset : at the beginning of 2012 the jeater company had the following balances in its accounts cash 4300 inventory 9000 common

Steven company owns 40 of the outstanding voting common : steven company owns 40 of the outstanding voting common stock of nicole corp. and has the ability to significantly

User Account

All Pages