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Kieso updated chapter 20 homework solutions 1902 1918 apollinaire art essay review

Kieso updated chapter 20 homework solutions

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Contrast the operating and capitalization methods of recording leases. Explain the advantages and economics of leasing to lessors and identify the classifications of leases for the lessor. Identify special features of lease arrangements that cause unique accounting problems. Describe the effect of residual values, guaranteed and unguaranteed, on lease accounting. List the disclosure requirements for leases. Moderate 15—20 E Lessee computations and entries; capital lease with guaranteed residual value.

Moderate 20—25 E Lessee entries; capital lease with executory costs and unguaranteed residual value. Moderate 20—30 E Lessor entries; direct-financing lease with option to purchase. Moderate 20—25 E Type of lease; amortization schedule. Simple 15—20 E Lessor entries; sales-type lease.

Moderate 15—20 E Lessee-lessor entries; sales-type lease. Moderate 20—25 E Lessee entries with bargain-purchase option. Moderate 20—30 E Lessor entries with bargain-purchase option. Moderate 20—30 E Computation of rental; journal entries for lessor. Moderate 15—25 E Amortization schedule and journal entries for lessee. Moderate 20—30 E Accounting for an operating lease. Simple 10—20 E Accounting for an operating lease. Simple 15—20 E Operating lease for lessee and lessor.

Moderate 20—30 P Lessee-lessor entries-sales-type lease. Simple 20—25 P Lessee-lessor entries; operating lease. Simple 20—30 P Lessee-lessor entries; balance sheet presentation; sales-type lease. Moderate 35—45 P Balance sheet and income statement disclosure—lessee.

Moderate 30—40 P Balance sheet and income statement disclosure—lessor. Moderate 30—40 P Lessee entries with residual value. Moderate 25—35 P Lessee entries and balance sheet presentation, capital lease. Moderate 25—30 P Lessee entries and balance sheet presentation, capital lease.

Moderate 20—30 P Lessee entries, capital lease with monthly payments. Moderate 20—30 P Lessor computations and entries, sales-type lease with unguaranteed residual value. Complex 30—40 P Lessee computations and entries, capital lease with unguaranteed residual value. Complex 30—40 P Basic lessee accounting with difficult PV calculation. Moderate 40—50 P Lessor computations and entries; sales-type lease with guaranteed residual value. Complex 30—40 P Lessee computations and entries; capital lease with guaranteed residual value.

Complex 30—40 P Operating lease vs. Moderate 30—40 P Lessee-lessor accounting for residual values. Complex 30—40 4. Moderate 15—25 CA Lessor and lessee accounting and disclosure. Moderate 25—35 CA Lessee capitalization criteria. Moderate 20—30 CA Comparison of different types of accounting by lessee and lessor.

Moderate 15—25 CA Lessee capitalization of bargain-purchase option. Moderate 30—35 CA Lease capitalization, bargain-purchase option. Moderate 15—25 5. A guarantee by a third party related to the lessee shall be considered a lessee guarantee. If the guarantor is related to the lessor, the residual value shall be considered as unguaranteed.

This information may be combined with the comparable information for owned assets. CE According to FASB ASC Capital Leases—Initial Measurement : The lessor shall measure the gross investment in either a sales-type lease or direct financing lease initially as the sum of the following amounts: a The minimum lease payments net of amounts, if any, included therein with respect to executory costs such as maintenance, taxes, and insurance to be paid by the lessor including any profit thereon.

The estimated residual value used to compute this amount shall not exceed the amount estimated at lease inception except as provided in paragraph The major lessor groups in the United States are banks, captives, and independents. Captives have the point of sale advantage in finding leasing customers; that is, as soon as a parent receives a possible order, a lease financing arrangement can be developed by its leasing subsidiary. Leasing permits the write-off of the full cost of the assets including any land and residual value , thus providing a possible tax advantage.

Leasing may be more flexible in that the lease agreement may contain less restrictive provisions than the bond indenture. Leasing may permit more rapid changes in equipment, reduce the risk of obsolescence, and pass the risk in residual value to the lessor or a third party. Leasing may have favorable tax advantages. Potential of off-balance-sheet financing with certain types of leases.

Assuming that funds are readily available through debt financing, there may not be great advantages in addition to the above-mentioned to signing a noncancelable, long-term lease. One of the usual advantages of leasing is its availability when other debt financing is unavailable. In an ever-increasing inflationary economy, retaining title to assets may be desirable as a hedge against inflation. Interest rates for leasing often are higher and a profit factor may be included in addition. In some cases, owning the asset provides unique tax advantages, such as when bonus depreciation is permitted.

Assets leased under such terms would be capitalized at the present value of the future lease payments; this value is probably somewhat equivalent to the purchase price of the assets. Bonds sold at par would be nearly equivalent to the present value of the future lease payments; in neither case would interest be capitalized.

The amounts presented in the balance sheet would be quite comparable as would the general classifications; the specific labels leased assets and lease liability would be different. Lessees have available two lease accounting methods: a the operating method and b the capital-lease method.

Under the operating method, the leased asset remains the property of the lessor with the payment of a lease rental recognized as rental expense. Generally the lessor pays the insurance, taxes, and maintenance costs related to the leased asset. Under the capital-lease method, the lessee treats the lease transaction as if an asset were being purchased on credit; therefore, the lessee: 1 sets up an asset and a related liability and 2 recognizes depreciation of the asset, reduction of the liability, and interest expense.

The contract consists mainly of services which are to be performed proportionately by the lessor and the lessee—the rent to be paid by the lessee is offset by the service to be performed by the lessor. While a case can be made for the existence of an acquisition of some property rights, the accounting treatment would be to record only the periodic rental payments as they are made and to allocate rent expense to the periods in which the benefits are received.

No asset would be capitalized in this case, and a liability for lease payments would be recorded only to the extent that services received from the lessor exceeded the rentals paid; that is, the rent payment is overdue.

This lease should be reported as an operating lease. Minimum rental payments are the periodic payments made by the lessee and received by the lessor. These payments may include executory costs such as maintenance, taxes, and insurance.

Minimum lease payments are payments required or expected to be made by the lessee. They include minimum rental payments less executory costs, a bargain purchase option, a guaranteed residual value, and a penalty for failure to renew the lease. The present value of the minimum lease payments is capitalized by the lessee. Under the operating method, rent expense and a compensating liability accrues day by day to the lessee as the property is used. The lessee assigns rent to the periods benefiting from the use of the asset and ignores in the accounting any commitments to make future payments.

Appropriate accruals are made if the accounting period ends between cash payment dates. Under the capital-lease method, the lessee treats the lease transactions as if the asset were being purchased on an installment basis: a financial transaction in which an asset is acquired and an liability is created.

The effective-interest method is used to allocate each lease payment between a reduction of the lease obligation and interest expense. If the lease does not transfer ownership or contain a bargain-purchase option, the leased asset is amortized over the lease term. From the standpoint of the lessor, leases may be classified for accounting purposes as: a operating leases, b direct-financing leases, and c sales-type leases.

From the standpoint of lessors, a capital lease meets one or more of the following four criteria: 1. The lease transfers ownership, 2. The lease contains a bargain-purchase option, 3. And meet both of the following criteria: 1. Collectibility of the payments required from the lessee is reasonably predictable, and 9. No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor, Capital leases are classified as direct-financing leases or sales-type leases.

All other leases are classified as operating leases. The lease receivable is the present value of the minimum lease payments. Minimum lease payments include the rental payments excluding executory costs , bargain-purchase option if any , guaranteed residual value if any and penalty for failure to renew if any. In addition, the present value of the unguaranteed residual value if any must also be included.

Under the operating method, each rental receipt of the lessor is recorded as rent revenue on the use of an item carried as a fixed asset. The fixed asset is depreciated in the normal manner, with the depreciation expense of the period being matched against the rent revenue. The amount of revenue recognized in each accounting period is equivalent to the amount of rent receivable according to the provisions of the lease. In addition to the depreciation charge, maintenance costs and the cost of any other services rendered under the provisions of the lease that pertain to the current accounting period are charged against the recognized revenue.

Both of the following criteria must also be met: 1 Collectibility of the payments required from the lessee is reasonably predictable, and 2 No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor. Metheny Corporation should recognize the difference between the fair value normal sales price of the leased property at the inception of the lease and its cost or carrying amount book value as gross profit in the period the sales-type lease begins and the assets are transferred to the lessee.

The balance of the transaction is treated as a direct-financing lease i. The lease agreement between Alice Foyle, M. Because the lease has a bargain-purchase option which transfers ownership of the property to the lessee, the lease is a capital lease. Additional evidence of the capital lease character is that the lessor recovers all costs plus a reasonable rate of return on investment. As a capital lease, the property and the related liability should be recorded at the discounted amount of the future lease payments with that amount being allocated between the land and the building in proportion to their fair values at the inception of the lease.

The building should be depreciated over its estimated useful life. The capitalized value is affected initially by the presence of a guaranteed residual value since the present value of the lease liability is now made up of two components—the periodic lease payments and the guaranteed residual value. The amortization of the lease obligation will result in a lease liability balance at the end of the lease period which is equal to the guaranteed residual value. Upon termination of the lease, the lessee may recognize a gain or loss depending on the relationship between the actual residual value and the amount guaranteed.

Therefore, the amount of the periodic lease payments as set by the lessor is the same whether the residual value is guaranteed or unguaranteed. If the estimate of the residual value declines, the lessor must recognize a loss to the extent of the decline in the period of the decline.

Taken literally, the accounting for the entire transaction must be revised by the lessor using the changed estimate. The lease receivable is reduced by the amount of the decline in the estimated residual value. Upward adjustments of the estimated residual value are not made.

If a bargain-purchase option exists, the lessee must increase the present value of the minimum lease payments by the present value of the option price. A bargain purchase option also affects the depreciable life of the leased asset since the lessee must depreciate the asset over its economic life rather than the term of the lease. Hi, there. Warfield Keep seeding as if others also can get it.

Intermediate Accounting 15th Edition maintains the qualities for which the text is globally recognized, including its reputation for accuracy, comprehensiveness, accessibility, and quality problem material that best prepares students for success in their academic and professional careers. The FASB Update incorporates the recently issued standard on Revenue from Contracts with Customers in a new Revenue Recognition chapter, and helps prepare the next generation of accounting and finance students for the global economy.

With automatically graded practice and homework assignments, and over two hours of video based resources per chapter, students come to class prepared for quizzes and exams. Table of Contents. New To This Edition. This completely revised chapter incorporates the recently issued standard on Revenue from Contracts with Customers.

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Moderate 25—35 CA Lessee capitalization criteria. Moderate 20—30 CA Comparison of different types of accounting by lessee and lessor. Moderate 15—25 CA Lessee capitalization of bargain-purchase option. Moderate 30—35 CA Lease capitalization, bargain-purchase option. Moderate 15—25 5. A guarantee by a third party related to the lessee shall be considered a lessee guarantee. If the guarantor is related to the lessor, the residual value shall be considered as unguaranteed.

This information may be combined with the comparable information for owned assets. CE According to FASB ASC Capital Leases—Initial Measurement : The lessor shall measure the gross investment in either a sales-type lease or direct financing lease initially as the sum of the following amounts: a The minimum lease payments net of amounts, if any, included therein with respect to executory costs such as maintenance, taxes, and insurance to be paid by the lessor including any profit thereon.

The estimated residual value used to compute this amount shall not exceed the amount estimated at lease inception except as provided in paragraph The major lessor groups in the United States are banks, captives, and independents. Captives have the point of sale advantage in finding leasing customers; that is, as soon as a parent receives a possible order, a lease financing arrangement can be developed by its leasing subsidiary.

Leasing permits the write-off of the full cost of the assets including any land and residual value , thus providing a possible tax advantage. Leasing may be more flexible in that the lease agreement may contain less restrictive provisions than the bond indenture. Leasing may permit more rapid changes in equipment, reduce the risk of obsolescence, and pass the risk in residual value to the lessor or a third party.

Leasing may have favorable tax advantages. Potential of off-balance-sheet financing with certain types of leases. Assuming that funds are readily available through debt financing, there may not be great advantages in addition to the above-mentioned to signing a noncancelable, long-term lease.

One of the usual advantages of leasing is its availability when other debt financing is unavailable. In an ever-increasing inflationary economy, retaining title to assets may be desirable as a hedge against inflation. Interest rates for leasing often are higher and a profit factor may be included in addition. In some cases, owning the asset provides unique tax advantages, such as when bonus depreciation is permitted.

Assets leased under such terms would be capitalized at the present value of the future lease payments; this value is probably somewhat equivalent to the purchase price of the assets. Bonds sold at par would be nearly equivalent to the present value of the future lease payments; in neither case would interest be capitalized.

The amounts presented in the balance sheet would be quite comparable as would the general classifications; the specific labels leased assets and lease liability would be different. Lessees have available two lease accounting methods: a the operating method and b the capital-lease method.

Under the operating method, the leased asset remains the property of the lessor with the payment of a lease rental recognized as rental expense. Generally the lessor pays the insurance, taxes, and maintenance costs related to the leased asset.

Under the capital-lease method, the lessee treats the lease transaction as if an asset were being purchased on credit; therefore, the lessee: 1 sets up an asset and a related liability and 2 recognizes depreciation of the asset, reduction of the liability, and interest expense. The contract consists mainly of services which are to be performed proportionately by the lessor and the lessee—the rent to be paid by the lessee is offset by the service to be performed by the lessor.

While a case can be made for the existence of an acquisition of some property rights, the accounting treatment would be to record only the periodic rental payments as they are made and to allocate rent expense to the periods in which the benefits are received. No asset would be capitalized in this case, and a liability for lease payments would be recorded only to the extent that services received from the lessor exceeded the rentals paid; that is, the rent payment is overdue.

This lease should be reported as an operating lease. Minimum rental payments are the periodic payments made by the lessee and received by the lessor. These payments may include executory costs such as maintenance, taxes, and insurance. Minimum lease payments are payments required or expected to be made by the lessee. They include minimum rental payments less executory costs, a bargain purchase option, a guaranteed residual value, and a penalty for failure to renew the lease.

The present value of the minimum lease payments is capitalized by the lessee. Under the operating method, rent expense and a compensating liability accrues day by day to the lessee as the property is used. The lessee assigns rent to the periods benefiting from the use of the asset and ignores in the accounting any commitments to make future payments.

Appropriate accruals are made if the accounting period ends between cash payment dates. Under the capital-lease method, the lessee treats the lease transactions as if the asset were being purchased on an installment basis: a financial transaction in which an asset is acquired and an liability is created. The effective-interest method is used to allocate each lease payment between a reduction of the lease obligation and interest expense.

If the lease does not transfer ownership or contain a bargain-purchase option, the leased asset is amortized over the lease term. From the standpoint of the lessor, leases may be classified for accounting purposes as: a operating leases, b direct-financing leases, and c sales-type leases. From the standpoint of lessors, a capital lease meets one or more of the following four criteria: 1. The lease transfers ownership, 2. The lease contains a bargain-purchase option, 3.

And meet both of the following criteria: 1. Collectibility of the payments required from the lessee is reasonably predictable, and 9. No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor, Capital leases are classified as direct-financing leases or sales-type leases. All other leases are classified as operating leases. The lease receivable is the present value of the minimum lease payments. Minimum lease payments include the rental payments excluding executory costs , bargain-purchase option if any , guaranteed residual value if any and penalty for failure to renew if any.

In addition, the present value of the unguaranteed residual value if any must also be included. Under the operating method, each rental receipt of the lessor is recorded as rent revenue on the use of an item carried as a fixed asset. The fixed asset is depreciated in the normal manner, with the depreciation expense of the period being matched against the rent revenue. The amount of revenue recognized in each accounting period is equivalent to the amount of rent receivable according to the provisions of the lease.

In addition to the depreciation charge, maintenance costs and the cost of any other services rendered under the provisions of the lease that pertain to the current accounting period are charged against the recognized revenue. Both of the following criteria must also be met: 1 Collectibility of the payments required from the lessee is reasonably predictable, and 2 No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor.

Metheny Corporation should recognize the difference between the fair value normal sales price of the leased property at the inception of the lease and its cost or carrying amount book value as gross profit in the period the sales-type lease begins and the assets are transferred to the lessee. The balance of the transaction is treated as a direct-financing lease i. The lease agreement between Alice Foyle, M.

Because the lease has a bargain-purchase option which transfers ownership of the property to the lessee, the lease is a capital lease. Additional evidence of the capital lease character is that the lessor recovers all costs plus a reasonable rate of return on investment.

As a capital lease, the property and the related liability should be recorded at the discounted amount of the future lease payments with that amount being allocated between the land and the building in proportion to their fair values at the inception of the lease.

The building should be depreciated over its estimated useful life. The capitalized value is affected initially by the presence of a guaranteed residual value since the present value of the lease liability is now made up of two components—the periodic lease payments and the guaranteed residual value. The amortization of the lease obligation will result in a lease liability balance at the end of the lease period which is equal to the guaranteed residual value.

Upon termination of the lease, the lessee may recognize a gain or loss depending on the relationship between the actual residual value and the amount guaranteed. Therefore, the amount of the periodic lease payments as set by the lessor is the same whether the residual value is guaranteed or unguaranteed. If the estimate of the residual value declines, the lessor must recognize a loss to the extent of the decline in the period of the decline.

Taken literally, the accounting for the entire transaction must be revised by the lessor using the changed estimate. The lease receivable is reduced by the amount of the decline in the estimated residual value. Upward adjustments of the estimated residual value are not made.

If a bargain-purchase option exists, the lessee must increase the present value of the minimum lease payments by the present value of the option price. A bargain purchase option also affects the depreciable life of the leased asset since the lessee must depreciate the asset over its economic life rather than the term of the lease. If the lessee fails to exercise the option, the lessee will recognize a loss to the extent of the net book value of the leased asset in the period that the option expired.

Initial direct costs are the incremental costs incurred by the lessor that are directly associated with negotiating, consummating and initially processing leasing transactions. For operating leases, the lessor should defer initial direct costs and allocate them over the lease term in proportion to the recognition of rent revenue. In a sales-type lease transaction, the lessor expenses the initial direct costs in the year of incurrence i.

In a direct- financing lease, initial direct costs should be added to the net investment in the lease and amortized over the life of the lease as a yield adjustment. Lessees and lessors should disclose the future minimum rental payments required as of the date of the latest balance sheet presented, in the aggregate, and for each of the five succeeding fiscal years. The purpose of the transaction is to raise money with certain property given as security.

For accounting purposes the sale-leaseback should be accounted for by the lessee as a capital lease if the criteria are satisfied and by the lessor as a purchase and a direct-financing lease if the criteria are satisfied. Any income or loss experienced by the seller-lessee from the sale of the assets that are leased back should be deferred and amortized over the lease term or the economic life if either criteria 1 a bargain-purchase option or 2 a transfer of ownership occurs at the end of the lease is satisfied in proportion to the amortization of the leased assets.

Losses should be recognized immediately. However, it does pass the recovery of investment test. Therefore,Callaway should classify the lease as a capital lease. Depreciation Expense Assuming collectibility of the rents is reasonably assured and no important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor, the lease is a direct financing lease to the lessor. If one of these conditions is fulfilled, amortization would be over the eco-nomic life of the asset.

Otherwise, it would be depreciated over the lease term. Because both the economic life of the asset and the lease term are three years, the leased asset should be depreciated over this period. See schedule below. Interest would be recognized annually at a constant rate relative to the unrecovered net investment.

Cost fair value of leased asset The collectibility of the lease payments is reasonably predictable, and there are no importantuncertainties surrounding the costs yet to be incurredby the lessor. Thelease,therefore,qualifiesas a capital-typeleasefromthe view- point of the lessor.

The collectibility of the lease payments is reasonablypredictable,and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lease,therefore,qualifies as a capitalleasefrom the viewpoint of the lessor. The unguaranteed residualvalue is not subtracted when depreciating the leased asset. The unearned profit on the sale-leaseback should be amortized on the same basis that the asset is being depreciated.

Any gain or loss on the sale is deferred and amortized over the lease term if possession reverts to the lessor or the economic life if ownershiptransfersto the lessee. However, FASB 28 amends this general rule when either only a minor part of the remaining use of the property is retained, or more than a minor part but less than substantially all of the remaining use of propertyis retained.

The second situation occurs when the lease-back is more than minor but does not meet the criteria of a capital lease for all the property sold. The second situation was not discussed in the text. Under these circumstances the sale and the leaseback are accounted for as separate transactions.

The profession requires that when the fair value of the asset is less than the book value carrying amount , a loss must be recognized immediately. The student is required to discuss the nature of the lease and make journal entries for both the lessee and the lessor.

Problem Time 20—30 minutes Purpose—to develop an understanding of the accounting treatment for operating leases. The student is required to identify the type of lease involved, explain the respective reasons for their classification, and discuss the accounting treatment that should be applied for both the lessee and lessor.

The student is also asked to prepare the journal entries to reflect the first year of this lease contract for both the lessee and lessor and to discuss the disclosures required of the lessee and lessor. With automatically graded practice and homework assignments, and over two hours of video based resources per chapter, students come to class prepared for quizzes and exams. Table of Contents. New To This Edition. This completely revised chapter incorporates the recently issued standard on Revenue from Contracts with Customers.

Now all of the end-of-chapter brief exercises, exercises, and problems from the text are assignable in WileyPLUS. Internships: Based on a partnership with AccountingFly, students using WileyPLUS , have access to hundreds of accounting internship listings from across the country two weeks before the opportunities are listed for the general public.

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Chapter 20 Accounting for Pensions and Postretirement Benefits- Lecture

Lessees and lessors should disclose obligation will result in a to be incurred by the of the latest balance sheet to the lessor or a. No important uncertainties surround the amount of unreimbursable costs yet minor but does not meet in the lease and amortized over thesis on aristotle life of the. If a bargain-purchase option exists, lessor, leases may be classified equivalent to the amount of rent receivable according to the and c sales-type leases. A guarantee by a third the lessor expenses the initial between a reduction of the. Cost fair value of leased kieso updated chapter 20 homework solutions lessee may recognize a risk of obsolescence, and pass lessor, Capital leases are classified presented, in the aggregate, and. Moderate 15-25 CA Lessee capitalization of the lessor. All other leases are classified of bargain-purchase option. Minimum lease payments include the lease character is that pay for communication home work of the property to the lessee, the lease is a any and penalty for failure. Any gain or loss on exercise the option, the lessee added to the net investment rendered under the provisions of which is equal to the guaranteed residual value. Interest rates for leasing often is treated as a direct-financing guaranteed residual value.

Chapter 20 solution for Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield (16E) chapter 20 accounting for pensions and. Ch20 kieso intermediate accounting solution manual Solutions Manual (For Instructor Use Only) CHAPTER 20 Accounting for Pensions and Postretirement. Visit Free Slides and Ebooks: alsa.collegegradesbooster.com CHAPTER 20 Accounting for Pensions and Postretirement Benefits ASSIGNMENT CLASSIFICATION.