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.
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
$
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record depreciation.)
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record interest.)
1/1/18
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
(To record second payament.)
Question 27
Pearl 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.)
rose.angel13
0
9 years ago
8
