Analyzing, Interpreting, and Capitalizing Operating Leases On January 1,2020, Alexander Mack Adventures Inc. entered...
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Analyzing, Interpreting, and Capitalizing Operating Leases On January Alexander Mack Adventures Inc. entered into land leases that grant unrestricted access to property in Texas where the company plans to build an RV resort. Lease details follow. Lease term: years. Upfront fees: $ paid in cash. Annual lease payment: $ due at each yearend. Lessee responsible for property tax and insurance. The company also leased computer equipment with the following details. Lease term: years. Upfront fees: $ Annual lease payments: $ Lessee has option to purchase equipment for $ at end of lease. Required Note: For the following questions, round your answers to the nearest whole dollar; use rounded amounts for further calculations. a Given the lease contract facts, determine the classification for each of the two leases operating or finance Land lease: Answer Operating lease Computer equipment lease: Answer Finance lease b Determine the amount of the lease liability that Alexander Mack will add to its balance sheet at the inception of each lease. The company has a cost of debt capital. Land lease: $Answer Computer equipment lease: $Answer c What asset will the company add to its balance sheet for each lease? Land lease: Answer Rightofuse asset Answer Computer equipment lease: Answer PPE Answer d For each lease, prepare an amortization schedule that shows the interest and principal portions of each lease payment. Note: Adjust the final year for any rounding differences. Land Lease: Implicit Interest Lease Amortization Lease Liability, End Lease Liability, Lease Liability, Lease payment Lease Liability, Start Year Start Start x Implicit interest Lease Amortization Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Computer equipment lease: Implicit Interest Lease Amortization Lease Liability, End Lease Liability, Lease Liability, Lease payment Lease Liability, Start Year Start Start x Implicit interest Lease Amortization Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer e What will be the income statement effect of the land lease in $Answer of expense f What will be the income statement effect of the equipment lease in $Answer of expense g For fiscal what additional disclosure would Alexander Mack make in its footnotes pertaining to the remaining land lease payments? December Answer Answer Answer Answer Answer Thereafter Answer Total undiscounted lease payments Answer Imputed interest Answer Total operating lease liability Answer Weighted average remaining lease life in years Answer Weighted average discount rate Answer h On December what amount will be on the balance sheet asset and liability for each of the leases? Asset Liabilities Land lease: Answer Answer Computer equipment lease: Answer Answer
Analyzing, Interpreting, and Capitalizing Operating Leases
On January Alexander Mack Adventures Inc. entered into land leases that grant unrestricted access to property in Texas where the company plans to build an RV resort. Lease details follow.
Lease term: years.
Upfront fees: $ paid in cash.
Annual lease payment: $ due at each yearend.
Lessee responsible for property tax and insurance.
The company also leased computer equipment with the following details.
Lease term: years.
Upfront fees: $
Annual lease payments: $
Lessee has option to purchase equipment for $ at end of lease.
Required
Note: For the following questions, round your answers to the nearest whole dollar; use rounded amounts for further calculations.
a Given the lease contract facts, determine the classification for each of the two leases operating or finance
Land lease: Answer
Operating lease
Computer equipment lease: Answer
Finance lease
b Determine the amount of the lease liability that Alexander Mack will add to its balance sheet at the inception of each lease. The company has a cost of debt capital.
Land lease: $Answer
Computer equipment lease: $Answer
c What asset will the company add to its balance sheet for each lease?
Land lease: Answer
Rightofuse asset
Answer
Computer equipment lease: Answer
PPE
Answer
d For each lease, prepare an amortization schedule that shows the interest and principal portions of each lease payment.
Note: Adjust the final year for any rounding differences.
Land Lease: Implicit Interest Lease Amortization Lease Liability, End
Lease Liability, Lease Liability, Lease payment Lease Liability, Start
Year Start Start x Implicit interest Lease Amortization
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Computer equipment lease: Implicit Interest Lease Amortization Lease Liability, End
Lease Liability, Lease Liability, Lease payment Lease Liability, Start
Year Start Start x Implicit interest Lease Amortization
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e What will be the income statement effect of the land lease in
$Answer
of expense
f What will be the income statement effect of the equipment lease in
$Answer
of expense
g For fiscal what additional disclosure would Alexander Mack make in its footnotes pertaining to the remaining land lease payments?
December
Answer
Answer
Answer
Answer
Answer
Thereafter Answer
Total undiscounted lease payments Answer
Imputed interest Answer
Total operating lease liability Answer
Weighted average remaining lease life in years Answer
Weighted average discount rate Answer
h On December what amount will be on the balance sheet asset and liability for each of the leases?
Asset Liabilities
Land lease: Answer
Answer
Computer equipment lease: Answer
Answer
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