Carla Vista Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Sheridan Limited a replicator that cost $265,600 to manufacture and usually sells for $418,000. The lease agreement covers the replicator's 8-year useful life and requires eight equal annual rentals of $71,536 each, beginning May 29, 2023. The equipment reverts to Carla Vista at the end of the lease, at which time it is expected that the replicator will have a residual value of $49,500, which is not guaranteed by Sheridan, the lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Carla Vista's May 29, 2023 journal entries. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date May 29 May 29 Account Titles and Explanation Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease.) Cash Lease Receivable (Collection of first lease payment.) Debit 621788 265600 71536 Credit 418000 265600 203733 71536
Carla Vista Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Sheridan Limited a replicator that cost $265,600 to manufacture and usually sells for $418,000. The lease agreement covers the replicator's 8-year useful life and requires eight equal annual rentals of $71,536 each, beginning May 29, 2023. The equipment reverts to Carla Vista at the end of the lease, at which time it is expected that the replicator will have a residual value of $49,500, which is not guaranteed by Sheridan, the lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare Carla Vista's May 29, 2023 journal entries. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date May 29 May 29 Account Titles and Explanation Lease Receivable Cost of Goods Sold Sales Revenue Inventory Unearned Interest Income (To record inception of lease.) Cash Lease Receivable (Collection of first lease payment.) Debit 621788 265600 71536 Credit 418000 265600 203733 71536
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Carla Vista Corporation, which uses ASPE, manufactures replicators. On May 29, 2023, it leased to Sheridan Limited a replicator that
cost $265,600 to manufacture and usually sells for $418,000. The lease agreement covers the replicator's 8-year useful life and
requires eight equal annual rentals of $71,536 each, beginning May 29, 2023. The equipment reverts to Carla Vista at the end of the
lease, at which time it is expected that the replicator will have a residual value of $49,500, which is not guaranteed by Sheridan, the
lessee. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no
important uncertainties concerning costs.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
Prepare Carla Vista's May 29, 2023 journal entries. (List all debit entries before credit entries. Credit account titles are automatically
indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the
amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.)
Date
May 29
May 29
Account Titles and Explanation
Lease Receivable
Cost of Goods Sold
Sales Revenue
Inventory
Unearned Interest Income
(To record inception of lease.)
Cash
Lease Receivable
(Collection of first lease payment.)
Debit
621788
265600
71536
Credit
!!!
418000
265600
203733
71536
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