Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $14,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $99,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.

Exercise 15-17 (Algo) Lessee and lessor; operating lease [LO15-4] On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $14,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $99,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease.

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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6 Company A (lessee) has reached a lease agreement with Company B (assor) to kase a new carpet weaving machine beginning January 1, Year 1. The lease agreement contains the following information • The lease is for five years, requiring annual payments of $10,355.67 at the beginning of the year. • The weaving machine has a fair value at the beginning of the lease of $50,000; an estimated economic life of five years; and a guaranteed residual value of $2,500 (Company A expects that the value will be greater). • Present value of the weaving machine is $47,945.18. • There are no renewal options. At the end of the lease, the weaving machine will be returned to Company B. • Company A depreciates similar equipment that it purchases on a straight-line basis. • Company B sels the annual lease rate al 5% and Company A is aware of the rate. • The lease is a finance lease. COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment Date January 1, Year 1 January 1, Year 1 January…
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