Amount to be recovered (fair value) Lease payments at the beginning of each of the next eight years: ($771,147+ 5.7122*) $771,147 $135,000 *Present value of an annuity due of $1: n = 8, i = 11%. b. Red Baron's incremental borrowing rate is 12%. c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091. Required: 1. How should this lease be classified (a) by Bidwell Leasing (the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing. 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation. 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). X Answer is complete but not entirely correct.
Amount to be recovered (fair value) Lease payments at the beginning of each of the next eight years: ($771,147+ 5.7122*) $771,147 $135,000 *Present value of an annuity due of $1: n = 8, i = 11%. b. Red Baron's incremental borrowing rate is 12%. c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091. Required: 1. How should this lease be classified (a) by Bidwell Leasing (the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing. 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation. 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). X Answer is complete but not entirely correct.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I need help with only required 6 please
Transcribed Image Text:Amount to be recovered (fair value)
Lease payments at the beginning of each of the next eight
$771,147
$135,000
years: ($771,147+ 5.7122*)
*Present value of an annuity due of $1: n = 8, i = 11%.
b. Red Baron's incremental borrowing rate is 12%.
c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091.
Required:
1. How should this lease be classified (a) by Bidwell Leasing (the lessor) and (b) by Red Baron (the lessee)?
2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021.
3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club.
4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term.
5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing.
6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both
companies use straight-line depreciation.
7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment).
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 4
Required 5
Required 6
Required 7
Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment).
Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field. Round your intermediate and final answers to nearest whole dollar.)
Transcribed Image Text:3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club.
4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term.
5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing.
6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both
companies use straight-line depreciation.
7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment).
X Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 4
Required 5
Required 6
Required 7
Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment).
Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field. Round your intermediate and final answers to nearest whole dollar.)
No
Date
General Journal
Debit
Credit
1
December 31, 202 Lease payable
69,976 X
Interest expense
65,024
Cash
135,000
2
December 31, 202 Amortization expense
96,393 O
Right-of-use asset
96,393
3
December 31, 202 Cash
135,000 O
Lease receivable
69,276 V
Interest revenue
65,724 O
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