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What amount of interest revenue will Tower recognize for the 12 months ended 12/31/2024? If no interest revenue recognized, enter $0.

Gage Co. purchases land and constructs a service station and car wash for a total of $540,000. At January 2, 2025, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $900,000  and immediately leased from the oil company by Gage. The lease is a 10-year, noncancelable lease with annual lease payments of $97,000. The remaining economic life of the facility is 15 years. The residual value of the facility and land at the end of the lease is expected to be $100,000 and none is guaranteed by Gage. The fair value of the land and facility is $900,000 on January 2, 2025. The present value of lease payments is $600,000. What amount of gain will Gage recognize on the disposal of the land and facility on January 2, 2025? If no gain recognition enter $0.

Facts for Questions 11 to 15 Pisa, Inc. leased equipment from Tower Company under an 8-year lease requiring equal annual payments of $296,134 on January 1 of each year, with the first payment due at lease inception, which was 1/1/2024. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 10-year useful life and is expected to have  residual value of $300,000 at the end of the lease. None of the residual value is guaranteed.  The fair market value of the equipment on 1/1/2024 is $2,000,000. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%. Present value factors are below.   PV Annuity Due PV Ordinary Annuity PV of Single Sum 8%, 8 periods 6.20637 5.74664 0.540269 10%, 8 periods 5.86842 5.33493 0.466507   Use these facts to answer questions 11 to 15 below.

What amount will Pisa, Inc. recognize as a right-of-use asset at the lease inception?

Facts for Question 9 On January 1, 2025, Metalcraft leases a machine from Capital Leasing for 4 years with an annual lease payment of $15,000. The first payment is due on January 1, 2025. The rate implicit in the lease (which is known to Metalcraft) is 10%.  The estimated residual value of the equipment at the end of the lease is $100,000 and this amount is guaranteed by Metalcraft. Metalcraft believes the equipment will be worth at least $100,000 at the end of the lease.   PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 4 periods 3.48685 3.16987 0.683013 What amount will Metalcraft recognize as a right-of-use asset at lease inception?  

What amount of lease revenue will Tower recognize for the 12 months ended 12/31/2024? If no lease revenue recognized, enter $0.

Facts for Questions 23 to 29 Tower Company leased equipment to Pisa, Inc.  under an 8-year lease requiring equal annual payments of $265,667 on January 1 of each year, with the first payment due at lease inception, which was 1/1/2024. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 10-year useful life and is expected to have residual value of $650,000 at the end of the lease. All of the residual value is guaranteed by Pisa.  The equipment was carried in Tower’s accounting records at a cost of $1,600,000. The fair market value of the equipment on 1/1/2024 is $2,000,000. Pisa, Inc.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pisa, Inc.) is 8%.  Present value factors are below.   PV Annuity Due PV Ordinary Annuity PV of Single Sum 8%, 8 periods 6.20637 5.74664 0.540269 10%, 8 periods 5.86842 5.33493 0.466507   Use these facts to answer questions 23 to 29:

Facts for Question 10 On January 1, 2025, Metalcraft leases a machine from Capital Leasing for 4 years with an annual lease payment of $15,000. The first payment is due on January 1, 2025. The rate implicit in the lease (which is known to Metalcraft) is 10%.  The estimated residual value of the equipment at the end of the lease is $100,000 and this amount is guaranteed by Metalcraft. Metalcraft believes the equipment will be worth $75,000 at the end of the lease.   PV Annuity Due PV Ordinary Annuity PV Single Sum 10%, 4 periods 3.48685 3.16987 0.683013 What amount will Metalcraft recognize as a right-of-use asset at lease inception?

What amount of cost of sales will Tower recognize on the transaction? If no cost of sales recognized, enter $0.

Explain how the lessee measures the lease liability and the related right-of-use asset at the beginning of the lease. Identify the way in which this measurement differs from the amount used in the “present value test.”