The lessor incurs no material initial direct costs

Assignment Help Accounting Basics
Reference no: EM13867146

On January 1, 2010, the Ballieu Company leases specialty equipment with an economic life of eight years to the Anderson Company. The lease contains the following terms and provisions: The lease is noncancelable and has a term of eight years. The annual rentals are $35,000, payable at the beginning of each year. The interest rate implicit in the lease is 14%. The Anderson Company agrees to pay all executory costs and is given an option to buy the equipment for $1 at the end of the lease term, December 31, 2017.The cost of the equipment to the lessor is $150,000 and the fair retail value is approximately $185,100. The lessor incurs no material initial direct costs. The collectability of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. The lessor estimates that the fair value is expected to be significantly greater than $1 at the end of the lease term. The lessor calculates that the present value on January 1, 2010 of eight annual payments in advance of $35,000 discounted at 14% is $185,090.68 (the $1 purchase option is ignored as immaterial).

Required:
1. Identify the classification of the lease transaction from the point of view of Ballieu Company. Give the reasons for your classification.

2. Prepare all the journal entries for Ballieu Company for the years 2010 and 2011.3. Discuss the disclosure requirements for the lease transaction in the notes to the financial statements of the Ballieu Company.

Reference no: EM13867146

Questions Cloud

Compare and contrast the fayols polc functions of management : Compare and contrast the Fayol's POLC functions of management
Calculate the standard deviation for each department : Calculate the 95% standard deviation for each department and indicate for me if any department is receiving on average $2k or more on the high end.
Dividends declared and paid during the current year : Complete the following: Shares authorized ____. Shares issued ____. Shares outstanding  ____. 2. The balance in Additional Paid-in Capital would be $ ____. 3. Earnings per share is $ ____. 4. Dividends paid per share of common stock is $ ____. 5. Tre..
Determine the objectives desired by alex from the solution : Determine the Objectives desired by Alex from the solution
The lessor incurs no material initial direct costs : On January 1, 2010, the Ballieu Company leases specialty equipment with an economic life of eight years to the Anderson Company. The lease contains the following terms and provisions:
What is the position of the first queue element : Suppose that queue is implemented as an array with the special reserved slot, as described in this chapter. Also, suppose that the size of the array implementing queue is 100. If the value of queueFront is 50, what is the position of the first queue ..
What is the least that steve should accept from westinghouse : What probability of success is Westinghouse's offer better than Edison Energys - what is the least that Steve should accept from Westinghouse.
The rest of the world gets larger : How is a Large open economy affected when a trade deficit in the rest of the world gets larger?
What is the name of this piece of art or architecture : What is the name of this piece of art or architecture? Where is it located? Discuss the importance of the art/architecture in its native location. What impact does it have on you as a traveler seeing it for the first time

Reviews

Write a Review

Accounting Basics Questions & Answers

  A company is considering replacing old equipment with new

a company is considering replacing old equipment with new equipment. which of the following is a relevant cost for

  I5-35 sale of property received as a gift during the

i5-35 sale of property received as a gift. during the current year stan sells a tract of land for 800000. the property

  Processing the digital credentials

What function (accounting, finance, or management) should process the digital credentials? In formulating your answer, keep in mind at least the following considerations:

  Production for the period for conversion costs

A process with no beginning work in process, completed and transferred out 14,000 units during a period and had 7,000 units in the ending work in process that were 50% complete. How much is equivalent units of production for the period for convers..

  Do you see superviors and or managers receiving personal

do you see superviors and or managers receiving personal benefits at your organization? if so is it ethical? are they

  Memo to the ceo discussing findings from ratio calculation

Resources: Virtual Organizations Riordan Manufacturing, Inc. 2010-2011 Select one of the Virtual Organizations as the basis for this assignment. Access the information contained in your selected organization's balance sheet and income statement to ca..

  The information is available for completed job 402 direct

the information is available for completed job 402 direct materials 60000 direct labor 90000 manufacturing overhead

  Smith and jones each own tracts of land because of the

smith and jones each own tracts of land. because of the location of their current operations each would prefer to have

  An outside supplier has offered to sell the company similar

a company makes wheels which it uses in the production of childrens wagons. the companys costs to produce 260000 wheels

  Projects fund for a multi-year capital project

What journal entry should be made at the beginning of the fiscal year to reestablish the Encumbrances account of a capital projects fund for a multi-year capital project?

  Austin wool products purchases raw wool and processes it

austin wool products purchases raw wool and processes it into yarn. the spindles of yarn can then be sold directly to

  What amount of gains or losses on transactions

Apr.17 Purchased 20,000 shares of Company W common stock for $395,000 plus a brokerage fee of $3,500. The shares represent a 30% ownership in Company W.

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!

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