Question

Question 1 Bonita Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Windsor Airlines for a period of 10 years. The normal selling price of the equipment is $299,140, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. Windsor will pay annual payments of $40,000 at the beginning of each year. Bonita incurred costs of $180,000 in manufacturing the equipment and $40,000 in sales commissions in closing the lease. Bonita has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Windsor Airlines has an incremental borrowing rate of 8%. Click here to view the factor table. Compute the amount of the initial lease liability. (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.) The amount of the initial lease liability $ Prepare a 10-year lease amortization schedule. (Round answers to 0 decimal places e.g. 58,970.) WINDSOR AIRLINES (Lessee) Lease Amortization Schedule (Annuity-due basis and URV) Beginning of Year Annual Lease Payment Interest on Lease Liability Reduction of Lease Liability Lease Liability Initial PV $ $ $ $ 1 2 3 4 5 6 7 8 9 10 $ $ $ Prepare all of the lessee’s journal entries for the first year. Assume straight-line depreciation. (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 answers to 0 decimal places e.g. 58,970.) Account Titles and Explanation Debit Credit (To record the lease.) (To record the first rental payment.) (To record accrual of annual interest on lease obligation.) (To record depreciation expense for first year.)

Answer 1