Ivanhoe Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The...

Ivanhoe Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,992 at the beginning of each year. The first payment is received on January 1, 2020. Ivanhoe had purchased the machine during 2016 for $142,000. Collectibility of lease payments by Ivanhoe is probable. Ivanhoe set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Ivanhoe at the termination of the lease.

Compute the amount of the lease receivable.

Prepare all necessary journal entries for Ivanhoe for 2020

Suppose the collectibility of the lease payments was not probable for Ivanhoe. Prepare the necessary journal entry for the company in 2020

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Expert Solution

INSTALLMENT	DATE	PAYMENT IN $	VALUE FACTOR @6%	VALUE
1	1.jan.2020	30992	1	30992
2	1.jan.2021	30992	0.9434	29237.85
3	1.jan.2022	30992	0.8900	27582.88
4	1.jan.2023	30992	0.8396	26020.88
5	1.jan.2024	30992	0.7921	24548.76
6	1.jan.2025	30992	0.7473	23160.32
7	1.jan.2026	30992	0.705	21849.36
8	1.jan.2017	30992	0.6651	20612.77
present value				204004.82

DATE	PARTICULARS	DEBIT $	CREDIT $
01.01.2020	lease recievable	204004.82
	cost of good sold	142000
	sales revenue		204004.82
	inventory		140000
	(to record inception of lease)

01.01.2020	cash	30992
	lease receivable		30992
	(to record first payment of lease)

31.12.2020	interest receivable(204004.82-3099246%)	196566.74
	interest revenue		196566.74
	(to record interest on the amount after first installment)

DATE	PARTICULARS	DEBIT	CREDIT
01.01.2020	cash	30992
	deposit liability		30992
	(to record collectibility when lease payment is not probable)

ekkarill92 answered 1 year ago

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