Question

Grouper Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to Monty Airlines for a period of 10 years. The normal selling price of the equipment is $255,322, and its unguaranteed residual value at the end of the lease term is estimated to be $20,600. Monty will pay annual payments of $36,600 at the beginning of each year. Grouper incurred costs of $179,000 in manufacturing the equipment and $3,800 in sales commissions in closing the lease. Grouper has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%. Monty Airlines has an incremental borrowing rate of 10%.

Prepare a 10-year lease amortization schedule. (Round answers to 0 decimal places e.g. 58,970.)

MONTY 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.)

Answer 1