Exercise 21-8 (Part Level Submission)The following facts pertain to a noncancelable lease agreement between Windsor Leasing Company and Sheridan Company, a lessee. | Inception date: | | May 1, 2017 | | | Annual lease payment due at the beginning of | | | | | each year, beginning with May 1, 2017 | | $21,737.01 | | | Bargain-purchase option price at end of lease term | | $3,800 | | | Lease term | | 5 | years | | Economic life of leased equipment | | 10 | years | | Lessor’s cost | | $68,000 | | | Fair value of asset at May 1, 2017 | | $93,000 | | | Lessor’s implicit rate | | 10 | % | | Lessee’s incremental borrowing rate | | 10 | % |
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. Click here to view factor tables |
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Prepare a lease amortization schedule for Sheridan Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and Round answers to 2 decimal places, e.g. 15.25.)SHERIDAN COMPANY (Lessee)
Lease Amortization Schedule | Date | | Annual Lease Payment Plus
BPO | | Interest on
Liability | | Reduction of Lease
Liability | | Lease Liability | | 5/1/17 | | | | | | | | | | | | | | (To record depreciation.) | | | | | | | | | | | | | | | (To record interest.) | | | 1/1/18 | | | | | | | | | | | | | | | | (To record second payament.) | | |
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Question 27Pearl Corporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicator that had cost $100,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,200 payable each January 1, beginning January 1, 2017. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Prepare Pearl’s January 1, 2017, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)Click here to view factor tablesDate | Account Titles and Explanation | Debit | Credit | January 1, 2017 | | | | | | | | | | | (To record the lease.) | | | January 1, 2017 | | | | | | | | | | | (To record cost.) | | | January 1, 2017 | | | | | | | | | | | (To record first lease payment.) |
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