Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $94,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Carla Vista expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability 1/1/20 $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places 12/31/20 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 12/31/21 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 12/31/22 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places Prepare the journal entry at commencement of the lease for Carla Vista. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Carla Vista’s implicit rate (Sharrer’s incremental borrowing rate is 9%), and (2) Sharrer incurs initial directs costs of $12,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount These are the accounts that can be used: Accounts Payable Accumulated Depreciation-Buildings Accumulated Depreciation-Leased Buildings Accumulated Depreciation-Capital Leases Accumulated Depreciation-Equipment Accumulated Depreciation-Leased Equipment Accumulated Depreciation-Leased Machinery Accumulated Depreciation-Machinery Accumulated Depreciation-Right-of-Use Asset Advertising Expense Amortization Expense Airplanes Buildings Cash Cost of Goods Sold Deferred Gross Profit Deposit Liability Depreciation Expense Equipment Executory Costs Executory Costs Payable Gain on Disposal of Equipment Gain on Disposal of Plant Assets Gain on Lease Gain on Sale of Buildings Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Leased Asset Leased Buildings Leased Equipment Lease Expense Leased Land Lease Liability Lease Receivable Lease Revenue Legal Expense Loss on Capital Lease Machinery Maintenance and Repairs Expense Notes Payable Prepaid Lease Executory Costs Prepaid Legal Fees Property Tax Expense Property Tax Payable Rent Expense Rent Payable Rent Receivable Rent Revenue Revenue from Sale-Leaseback Right-of-Use Asset Salaries and Wages Expense Sales Revenue Selling Expenses Trucks Unearned Profit on Sale-Leaseback Unearned Lease Revenue Unearned Service Revenue

Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $94,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Carla Vista expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability 1/1/20 $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places 12/31/20 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 12/31/21 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places 12/31/22 enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places enter a dollar amount rounded to 0 decimal places Prepare the journal entry at commencement of the lease for Carla Vista. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Carla Vista’s implicit rate (Sharrer’s incremental borrowing rate is 9%), and (2) Sharrer incurs initial directs costs of $12,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount These are the accounts that can be used: Accounts Payable Accumulated Depreciation-Buildings Accumulated Depreciation-Leased Buildings Accumulated Depreciation-Capital Leases Accumulated Depreciation-Equipment Accumulated Depreciation-Leased Equipment Accumulated Depreciation-Leased Machinery Accumulated Depreciation-Machinery Accumulated Depreciation-Right-of-Use Asset Advertising Expense Amortization Expense Airplanes Buildings Cash Cost of Goods Sold Deferred Gross Profit Deposit Liability Depreciation Expense Equipment Executory Costs Executory Costs Payable Gain on Disposal of Equipment Gain on Disposal of Plant Assets Gain on Lease Gain on Sale of Buildings Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Leased Asset Leased Buildings Leased Equipment Lease Expense Leased Land Lease Liability Lease Receivable Lease Revenue Legal Expense Loss on Capital Lease Machinery Maintenance and Repairs Expense Notes Payable Prepaid Lease Executory Costs Prepaid Legal Fees Property Tax Expense Property Tax Payable Rent Expense Rent Payable Rent Receivable Rent Revenue Revenue from Sale-Leaseback Right-of-Use Asset Salaries and Wages Expense Sales Revenue Selling Expenses Trucks Unearned Profit on Sale-Leaseback Unearned Lease Revenue Unearned Service Revenue

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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Question

Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Date	Rent Receipt/ Payment	Interest Revenue/ Expense	Reduction of Principal	Receivable/ Liability
1/1/20	$enter a dollar amount rounded to 0 decimal places	$enter a dollar amount rounded to 0 decimal places	$enter a dollar amount rounded to 0 decimal places	$enter a dollar amount rounded to 0 decimal places
12/31/20	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places
12/31/21	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places
12/31/22	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places	enter a dollar amount rounded to 0 decimal places

Prepare the journal entry at commencement of the lease for Carla Vista. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

Prepare the journal entry at commencement of the lease for Sharrer. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Carla Vista’s implicit rate (Sharrer’s incremental borrowing rate is 9%), and (2) Sharrer incurs initial directs costs of $12,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 1	enter a debit amount	enter a credit amount

These are the accounts that can be used:

Accounts Payable
Accumulated Depreciation-Buildings
Accumulated Depreciation-Leased Buildings
Accumulated Depreciation-Capital Leases
Accumulated Depreciation-Equipment
Accumulated Depreciation-Leased Equipment
Accumulated Depreciation-Leased Machinery
Accumulated Depreciation-Machinery
Accumulated Depreciation-Right-of-Use Asset
Advertising Expense
Amortization Expense
Airplanes
Buildings
Cash
Cost of Goods Sold
Deferred Gross Profit
Deposit Liability
Depreciation Expense
Equipment
Executory Costs
Executory Costs Payable
Gain on Disposal of Equipment
Gain on Disposal of Plant Assets
Gain on Lease
Gain on Sale of Buildings
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Land
Leased Asset
Leased Buildings
Leased Equipment
Lease Expense
Leased Land
Lease Liability
Lease Receivable
Lease Revenue
Legal Expense
Loss on Capital Lease
Machinery
Maintenance and Repairs Expense
Notes Payable
Prepaid Lease Executory Costs
Prepaid Legal Fees
Property Tax Expense
Property Tax Payable
Rent Expense
Rent Payable
Rent Receivable
Rent Revenue
Revenue from Sale-Leaseback
Right-of-Use Asset
Salaries and Wages Expense
Sales Revenue
Selling Expenses
Trucks
Unearned Profit on Sale-Leaseback
Unearned Lease Revenue
Unearned Service Revenue

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