Calculate the amount of the asset and liability

Assignment Help Accounting Basics

Reference no: EM131765166

Question: Timothy Company signs a lease agreement dated January 1, 2016 with Jasper Company for equipment. The lease terms, provisions, and related events are as follows:

1) Timothy agrees to pay all executory costs

2) The lease does not contain any renewal or bargain purchase options.

3) The lease term is 6 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year.

4) The equipment has an estimated useful life of 7 years, fair value of $225,000, and does not have a residual value.

5) The annual payment is set by Jasper at $51,661.67 to earn a rate of return of 10%. Timothy is aware of the rate and it is equal to its borrowing rate.

6) Timothy uses the straight line method of depreciation on all of its equipment.

Required: 1) Determine whether the lease is an operating lease or a capital lease for the lessee

2) Calculate the amount of the asset and liability of Timothy at the inception of the lease.

3) Prepare the amoritization table for the lease and interest expense.

4) Prepare the journal entries for Timothy for 2016.

Reference no: EM131765166

Questions Cloud

Discuss the moderated change of the clients and server os : Discuss the moderated change of the clients and server OS. Cutting edge innovation (specify why you would take this risk and what returns you expect from it).

What is the incremental profit : Alvarez Company is considering the following alternatives: Revenues $50,000 $60,000, What is the incremental profit

Discuss the degree of knowledge in technology and ais : her understanding of accounting concepts and guidelines. The degree of knowledge in technology and AIS will vary with each auditor

Environmental factors to assess operational risk : Can we look at environmental factors to assess operational risk? need some feedback to explain the pros and cons associated with this question.

Calculate the amount of the asset and liability : Timothy Company signs a lease agreement dated January 1, 2016 with Jasper Company for equipment. The lease terms, provisions, and related events are as follows.

Decision to post the coffee-break notice : List the pros and cons of Mr. Jackson’s decision to post the coffee-break notice. List the pros and cons of Mr. Jackson’s decision to post the coffee-break noti

Forecast next year cost of goods sold : You forecast sales to increase to $110,000 next year. Using the percent of sales method, forecast next year's cost of goods sold.

Write sql ddl corresponding to the given schema : Write SQL DDL corresponding to the following schema. Make any reasonable assumptions about data types, and be sure to declare primary and foreign keys.

Prepare and incremental analysis for the special order : Gruner and Company produces golf disks which it normally sells to retailers for 7 dollars each. Prepare and incremental analysis for the special order

User Account

All Pages