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Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January...

Hughey Co. as lessee records a three-year lease of machinery with guaranteed residual value on January 1, 2011. The annual lease payments of $350,000 are made at the end of each year. The total present value of the annual lease payments at 10% is $870,398. The guaranteed residual value at the end of the lease term is $100,000 and Hughey Co. expects the leased machinery to have an actual residual value of 80,000. The present value factor for a single sum at 10% and 3 years is 0.75131. The machine reverts to the lessor at the end of the lease term. Hughey uses the effective-interest method and straight-line amortization. Hughey classifies the lease as a finance lease. Please round your calculations to the nearest dollar.

(a) Prepare a lease amortization schedule.

(b) Prepare all of the lessee's journal entries for 2011.

(c) Prepare all of the lessee's journal entries for 2013, assuming that the machine is worth $50,000 at the end of the lease term when it is returned to the lessor.

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ekkarill92 answered 1 year ago
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