PLEASE, PROVIDE CORRECT RESPONSE AND I WILL LIKE YOUR ANSWER. Problem 21-16 (Part Level Submission)Bramble Corporation entered into a lease agreement on January 1, 2020, to provide Cullumber Company with a piece of machinery. The terms of the lease agreement were as follows.1. The lease is to be for 3 years with rental payments of $13,768 to be made at the beginning of each year.2. The machinery has a fair value of $60,000, a book value of $40,000, and an economic life of 8 years.3. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000, none of which is guaranteed.4. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.5. The implicit rate is 6%, which is known by Dawkins.6. Collectibility of the payments is probable. Prepare the amortization schedules Cullumber will use over the lease term.CULLUMBER COMPANYLease Amortization ScheduleAnnuity-Due BasisInterestReduction ofDateAnnual Paymenton LiabilityLease LiabilityLease Liability1/1/201/1/2013768137681/1/211376812,941.92826.081/1/221376812,941.92826.08Lease Expense Schedule(C)Amortization of(A)Straight-LineExpense(B)Interest onRight-of-Use Asset(and Liability)(А-B)Carrying Value ofRight-of-Use AssetDateLease Liability1/1/2012/31/20$$12/31/2112/31/22

Here Bramble Corp is lessor and Cullumber is lessee. For Lessor and lessee both, it is a operating…

Answered: . The terms of the lease agreement were…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 21-16 (Part Level Submission)

Bramble Corporation entered into a lease agreement on January 1, 2020, to provide Cullumber Company with a piece of machinery. The terms of the lease agreement were as follows.

1.		The lease is to be for 3 years with rental payments of $13,768 to be made at the beginning of each year.
2.		The machinery has a fair value of $60,000, a book value of $40,000, and an economic life of 8 years.
3.		At the end of the lease term, both parties expect the machinery to have a residual value of $25,000, none of which is guaranteed.
4.		The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature.
5.		The implicit rate is 6%, which is known by Dawkins.
6.		Collectibility of the payments is probable.

Prepare the amortization schedules Cullumber will use over the lease term.
CULLUMBER COMPANY
Lease Amortization Schedule
Annuity-Due Basis
Interest
Reduction of
Date
Annual Payment
on Liability
Lease Liability
Lease Liability
1/1/20
1/1/20
13768
13768
1/1/21
13768
12,941.92
826.08
1/1/22
13768
12,941.92
826.08
Lease Expense Schedule
(C)
Amortization of
(A)
Straight-Line
Expense
(B)
Interest on
Right-of-Use Asset
(and Liability)
(А-B)
Carrying Value of
Right-of-Use Asset
Date
Lease Liability
1/1/20
12/31/20
$
$
12/31/21
12/31/22

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