Question

On January 1, 2021, SantanaBrewing, a lessee, entered into three non-cancelable leases for new equipment, Lease O, Lease M, and Lease G. None of the three leases transfers ownership of the equipment to Santana Brewing at the end of the lease term. The following information is specific to each lease. 

  1. Lease O does not contain a bargain purchase option. 

  2.  Lease M contains a bargain purchase option. The lease term is equal to 50% of the estimated economic life of the equipment.

  3.  Lease G does not contain a bargain purchase option. The lease term is equal to 50% of the estimated economic life of the equipment.

    Required: a. What amount, if any, should Santana Brewing record as a liability at commencement of the lease for each of the three leases above? Please explain your answer! (10 points) b. Assuming that the lease payments are made on a straight-line basis, how should Santana Brewing record each lease payment for each of the three leases above? Please explain! (10 points)

0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
On January 1, 2021, SantanaBrewing, a lessee, entered into three non-cancelable leases for new equipment, Lease O, Lease M, and Lease G. None of the three leases transfers ownership of the equipment to Santana Brewing at the end of the lease term. The f
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • Pike Incorporated leases a piece of equipment to Rose Inc. on January 1, 2017. The non-cancelable...

    Pike Incorporated leases a piece of equipment to Rose Inc. on January 1, 2017. The non-cancelable lease agreement calls for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000 and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Pike sets the...

  • Pike Incorporated leases a piece of equipment to Rose Inc. on January 1, 2017. The non-cancelable...

    Pike Incorporated leases a piece of equipment to Rose Inc. on January 1, 2017. The non-cancelable lease agreement calls for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000 and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Pike sets the...

  • Under U.S. GAAP, which of the following items would require a lessee to classify a lease of equipment as a capital lease...

    Under U.S. GAAP, which of the following items would require a lessee to classify a lease of equipment as a capital lease? a. The lease term is 90% of the estimated economic life of the lease property. b. The lease does not contain a bargain purchase option. c. The present value of the contractual minimum lease payments is 75% of the fair value of the leased property. d. There is no transfer of ownership to the lessee at the end...

  • The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.                ...

    The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.                 Lease Origination Date                                                                                                                   May 1, 2017                 Annual lease payments due at the beginning of each lease year                                   $20.471.94                 Bargain purchase option price at the end of lease term                                                   $4,000                 Lease term                                                                                                                                          5 years                 Economic life of leased equipment                                                                                          10 years                 Lessor’s cost                                                                                                                                       $65,000                 Fair value of asset on May 1, 2017                                                                                             $91,000                ...

  • The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.                ...

    The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.                 Lease Origination Date                                                                                                                   May 1, 2017                 Annual lease payments due at the beginning of each lease year                                   $20.471.94                 Bargain purchase option price at the end of lease term                                                   $4,000                 Lease term                                                                                                                                          5 years                 Economic life of leased equipment                                                                                          10 years                 Lessor’s cost                                                                                                                                       $65,000                 Fair value of asset on May 1, 2017                                                                                             $91,000                ...

  • E21.10 (LO 2,4) (Lessee Entries with Bargain Purchase Option) The following facts pertain to a non-cancelable...

    E21.10 (LO 2,4) (Lessee Entries with Bargain Purchase Option) The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. May 1, 2020 Commencement date Annual lease payment due at the beginning of each year, beginning with May 1, 2020 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2020 Lessor's implicit rate Lessee's incremental borrowing rate...

  • LeMond Leasing leases equipment to Costigan Construction. The non-cancelable term is 6 years beginning January 1,...

    LeMond Leasing leases equipment to Costigan Construction. The non-cancelable term is 6 years beginning January 1, 20X1, with equal rental payments of $43,162 paid at the beginning of each year. The equipment’s title transfers to Costigan at the end of the lease term. The fair value of the equipment at the inception of the lease is $215,496 and its cost is $180,496. The equipment has a useful life of 7 years. The lessee’s incremental borrowing rate is 10%, and the...

  • The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.               ...

    The following facts pertain to a non-cancelable lease agreement between Ford and NextCar, a lessee.                Lease Origination Date                                                                                                            May 1, 2017                Annual lease payments due at the beginning of each lease year                                 $20.471.94                Bargain purchase option price at the end of lease term                                                 $4,000                Lease term                                                                                                                                  5 years                Economic life of leased equipment                                                                                       10 years                Lessor’s cost                                                                                                                               $65,000                Fair value of asset on May...

  • The following facts pertain to a non-cancelable lease agreement between Sheridan Leasing Company and Skysong Company,...

    The following facts pertain to a non-cancelable lease agreement between Sheridan Leasing Company and Skysong Company, a lessee. Commencement date May 1, 2020 Annual lease payment due at the beginning of    each year, beginning with May 1, 2020 $15,349.90 Bargain purchase option price at end of lease term $6,000 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $65,000 Fair value of asset at May 1, 2020 $76,000 Lessor’s implicit rate 4 % Lessee’s incremental borrowing...

  • Problem 3: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date...

    Problem 3: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date of the lease 12/31/YO Annual lease payment Payment 1 due immediately) $20,472 Bargain Purchase Option (lessee expects to exercise) $4,000 Lease Term 5 years Economic Life of Leased Asset 10 years Lessor's Cost of the asset $65,000 Fair Value of the asset $91.000 Lessor's Implicit Rate & Lessee's Incremental Borrowing Rate The collectability of the lease payments by Lessor is probable. A. For the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT