age Hill Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Sage Hill is probable. Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required. Amount of the annual rental payment Prepare an amortization schedule that is suitable for the lessor for the lease term SAGE HILL LEASING COMPANY (Lessor) Lease Amortization Schedule Date Annual Lease Payment Plus URV Interest on Lease Receivable Recovery of Lease Receivable Lease Receivable 1/1/20 $enter a dollar amount $enter a dollar amount $enter a dollar amount $enter a dollar amount 1/1/20 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/21 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/22 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/23 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/24 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/25 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 12/31/25 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Prepare all of the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of lease payments, and the recognition of revenue. Assume the lessor’s annual accounting period ends on December 31, and it does not use reversing entries.

age Hill Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2020. 5. Collectibility of the lease payments by Sage Hill is probable. Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required. Amount of the annual rental payment Prepare an amortization schedule that is suitable for the lessor for the lease term SAGE HILL LEASING COMPANY (Lessor) Lease Amortization Schedule Date Annual Lease Payment Plus URV Interest on Lease Receivable Recovery of Lease Receivable Lease Receivable 1/1/20 $enter a dollar amount $enter a dollar amount $enter a dollar amount $enter a dollar amount 1/1/20 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/21 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/22 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/23 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/24 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 1/1/25 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount 12/31/25 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Prepare all of the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of lease payments, and the recognition of revenue. Assume the lessor’s annual accounting period ends on December 31, and it does not use reversing entries.

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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age Hill Leasing Company signs an agreement on January 1, 2020, to lease equipment to Cole Company. The following information relates to this agreement.

1.		The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.
2.		The cost of the asset to the lessor is $301,000. The fair value of the asset at January 1, 2020, is $301,000.
3.		The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $31,010, none of which is guaranteed.
4.		The agreement requires equal annual rental payments, beginning on January 1, 2020.
5.		Collectibility of the lease payments by Sage Hill is probable.

Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required.

Amount of the annual rental payment

Prepare an amortization schedule that is suitable for the lessor for the lease term

SAGE HILL LEASING COMPANY (Lessor) Lease Amortization Schedule
Date	Annual Lease Payment Plus URV	Interest on Lease Receivable	Recovery of Lease Receivable	Lease Receivable
1/1/20	$enter a dollar amount	$enter a dollar amount	$enter a dollar amount	$enter a dollar amount
1/1/20	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
1/1/21	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
1/1/22	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
1/1/23	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
1/1/24	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
1/1/25	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount
12/31/25	enter a dollar amount	enter a dollar amount	enter a dollar amount	enter a dollar amount

Prepare all of the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of lease payments, and the recognition of revenue. Assume the lessor’s annual accounting period ends on December 31, and it does not use reversing entries.

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