Question
In: Accounting
The following facts pertain to a non-cancelable lease agreement between Metlock Leasing Company and Ivanhoe Company,...
The following facts pertain to a non-cancelable lease agreement
between Metlock Leasing Company and Ivanhoe Company, a
lessee.
| Commencement date | May 1, 2020 | ||
| Annual lease payment due at the beginning of | |||
| each year, beginning with May 1, 2020 | $15,138.16 | ||
| Bargain purchase option price at end of lease term | $4,000 | ||
| Lease term | 5 | years | |
| Economic life of leased equipment | 10 | years | |
| Lessor’s cost | $50,000 | ||
| Fair value of asset at May 1, 2020 | $68,000 | ||
| Lessor’s implicit rate | 8 | % | |
| Lessee’s incremental borrowing rate | 8 | % |
The collectibility of the lease payments by Metlock is
probable.
1.Compute the amount of the lease receivable at commencement of the lease.
2.Prepare a lease amortization schedule for Metlock for the 5-year lease term.
3.Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2020 and 2021. The lessor’s accounting period ends on December 31. Reversing entries are not used by Metlock.
4.Suppose the collectibility of the lease payments was not probable for Metlock. Prepare all necessary journal entries for the company in 2020
Solutions
Expert Solution
| 1.) | Date | Lease Payment & BPO | Present value @8% | Present Value | ||
| 01-05-2020 | 15,138.16 | 1 | 15,138 | |||
| 01-05-2021 | 15,138.16 | 0.92593 | 14,017 | |||
| 01-05-2022 | 15,138.16 | 0.85734 | 12,979 | |||
| 01-05-2023 | 15,138.16 | 0.79383 | 12,017 | |||
| 01-05-2024 | 15,138.16 | 0.73503 | 11,127 | |||
| 30-04-2025 | 4,000.00 | 0.68058 | 2,722 | |||
| Total | 79,690.80 | 68,000 | ||||
| Lease Receivable is $ 68,000 . | ||||||
| 2.) | Lease Amortization Schedule | |||||
| Date | Lease Receipts (a) | Interest Income (b) | Reduction in Lease Receivable c =(a-b) | Lease Receivable | ||
| 01-05-2020 | 68,000.00 | |||||
| 01-05-2020 | 15,138.16 | - | 15,138.16 | 52,861.84 | ||
| 01-05-2021 | 15,138.16 | 4,228.95 | 10,909.21 | 41,952.63 | ||
| 01-05-2022 | 15,138.16 | 3,356.21 | 11,781.95 | 30,170.68 | ||
| 01-05-2023 | 15,138.16 | 2,413.65 | 12,724.51 | 17,446.17 | ||
| 01-05-2024 | 15,138.16 | 1,395.69 | 13,742.47 | 3,703.70 | ||
| 30-04-2025 | 4,000.00 | 296.30 | 3,703.70 | |||
| Total | 79,690.80 | 11,690.80 | 68,000.00 | |||
| 3.) | Date | Particulars | Debit | Credit | ||
| 01-05-2020 | Lease Receivable | 68,000.00 | ||||
| Cost of Goods sold | 50,000.00 | |||||
| Sales Revenue | 68,000.00 | |||||
| Equipment | 50,000.00 | |||||
| 01-05-2020 | Cash | 15,138.16 | ||||
| Lease Receivable | 15,138.16 | |||||
| 31-12-2020 | Interest Receivable | 2,819.30 | ||||
| Interest Income | 2,819.30 | |||||
| (68,000 - 15,138.16 ) x 8% x 8/12 | ||||||
| 01-05-2021 | Cash | 15,138.16 | ||||
| Lease Receivable | 10,909.21 | |||||
| Interest Receivable | 2,819.30 | |||||
| Interest Income | 1,409.65 | |||||
| 31-12-2021 | Interest Receivable | 2,237.47 | ||||
| Interest Income | 2,237.47 | |||||
| (68,000 - 15,138.16 - 10,909.21 ) x 8% x 8/12 | ||||||
| 4.) | Date | Particulars | Debit | Credit | ||
| 01-05-2020 | Cash | 15,138.16 | ||||
| Deposit Liability | 15,138.16 | |||||
ekkarill92 answered 1 year agoRelated Solutions
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Riverbed Company,...
The following facts pertain to a non-cancelable lease agreement
between Faldo Leasing Company and Riverbed Company, a lessee.
Commencement date
January 1, 2017
Annual lease payment due at the
beginning of
each year, beginning with January 1, 2017
$ 116,249
Residual value of equipment at end
of lease term,
guaranteed by the lessee
$ 54,000
Expected residual value of
equipment at end of lease term
$ 49,000
Lease term
6
years
Economic life of leased
equipment
6
years
Fair value...
The following facts pertain to a non-cancelable lease agreement between Shamrock Leasing Company and Pharoah Company,...
The following facts pertain to a non-cancelable lease agreement
between Shamrock Leasing Company and Pharoah Company, a lessee.
Commencement Date
May 1, 2017
Annual Lease Payment due at the Beginning of Each Year,
Beginning with May 1, 2107
$17,225.30
Bargain purchase option price at end of lease term
$4,000
Lease term
5 years
Economic life of leased equipment
10 years
Lessor’s cost
$55,000
Fair value of asset at May 1, 2017
$77,000
Lessor's Implicit Rate
8%
Lessee's Incremental Borrowing Rate...
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Cullumber Company,...
The following facts pertain to a non-cancelable lease agreement
between Faldo Leasing Company and Cullumber Company, a lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of
each year, beginning with January 1,
$121,506
Residual value of equipment at end of lease term,
guaranteed by the lessee
$45,000
Expected residual value of equipment at end of lease term
$40,000
Lease term
6
years
Economic life of leased equipment
6
years
Fair value of asset at January 1,...
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Carla Company,...
The following facts pertain to a non-cancelable lease agreement
between Faldo Leasing Company and Carla Company, a
lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of
each year, beginning with January 1,
$102,418
Residual value of equipment at end of lease term,
guaranteed by the lessee
$55,000
Expected residual value of equipment at end of lease term
$50,000
Lease term
6
years
Economic life of leased equipment
6
years
Fair value of asset at January 1,...
The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Cullumber Company,...
The following facts pertain to a non-cancelable lease agreement
between Faldo Leasing Company and Cullumber Company, a lessee.
Commencement date
January 1,
Annual lease payment due at the beginning of
each year, beginning with January 1,
$121,506
Residual value of equipment at end of lease term,
guaranteed by the lessee
$45,000
Expected residual value of equipment at end of lease term
$40,000
Lease term
6
years
Economic life of leased equipment
6
years
Fair value of asset at January 1,...
The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company,...
The following facts pertain to a non-cancelable lease agreement
between Mooney Leasing Company and Rode Company, a lessee.
Commencement date May 1, 2020 Annual lease payment due at the
beginning of each year, beginning with May 1, 2020 $20,471.94
Bargain purchase option price at end of lease term $4,000 Lease
term 5 years Economic life of leased equipment 10 years Lessor’s
cost $65,000 Fair value of asset at May 1, 2020 $91,000 Lessor’s
implicit rate 8 % Lessee’s incremental borrowing...
Question 12 The following facts pertain to a non-cancelable lease agreement between Shamrock Leasing Company and...
Question 12
The following facts pertain to a non-cancelable lease agreement
between Shamrock Leasing Company and Pharoah Company, a
lessee.
Commencement date
May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020
$17,865.02
Bargain purchase option price at end of lease term
$7,000
Lease term
5
years
Economic life of leased equipment
10
years
Lessor’s cost
$65,000
Fair value of asset at May 1, 2020
$85,000
Lessor’s implicit rate
6
%
Lessee’s...
Question 12 The following facts pertain to a non-cancelable lease agreement between Shamrock Leasing Company and...
Question 12
The following facts pertain to a non-cancelable lease agreement
between Shamrock Leasing Company and Pharoah Company, a lessee.
Commencement date
May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020
$17,865.02
Bargain purchase option price at end of lease term
$7,000
Lease term
5
years
Economic life of leased equipment
10
years
Lessor’s cost
$65,000
Fair value of asset at May 1, 2020
$85,000
Lessor’s implicit rate
6
%
Lessee’s...
The following facts pertain to a non-cancelable lease agreement between Carla Vista Leasing Company and Tamarisk...
The following facts pertain to a non-cancelable lease agreement
between Carla Vista Leasing Company and Tamarisk Company, a lessee.
Commencement date May 1, 2017 Annual lease payment due at the
beginning of each year, beginning with May 1, 2017 $17,865.02
Bargain purchase option price at end of lease term $7,000 Lease
term 5 years Economic life of leased equipment 10 years Lessor’s
cost $65,000 Fair value of asset at May 1, 2017 $85,000 Lessor’s
implicit rate 6 % Lessee’s incremental...
Assume that the following facts pertain to a non-cancelable lease agreement between Fifth-Third Leasing Company and...
Assume that the following facts pertain to a non-cancelable
lease agreement between Fifth-Third Leasing Company and Bob Evans
Farms, a Lessee. Inception date January 1, 2017 Residual value of
equipment at end of lease term, guaranteed by the lessee $50,000
Lease term 6 years Economic life of leased equipment 8 years Fair
value of asset at January 1, 2017 $400,000 Lessor’s implicit rate
10% Lessee’s incremental borrowing rate 12% The lessee assumes
responsibility for all executory costs, which are expected...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- (Annuity payments) The Knutson Corporation needs to save $15 million to retire a $15 million mortgage...
- Classful Subnetting Given the following IP address of 212.134.99.112 with a subnet mask of 255.255.255.224 Class...
- Now explain how the ethnography methodology benefited the researchers to come to those conclusions about homelessness...
- The pKa of an aspartic acid side chain buried in the hydrophobic core of a protein...
- This question refers to BSG-Online (business strategy game). Why are the following items listed below important?...
- You may identify a particular company and how the marketplace that they have created is an...
- You are to start a new job earning $10 000 / month, plus allowances to the...
ADVERTISEMENT