Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, HayesCorp. leases ten trailers to Lester Company under a six-year noncancelablelease agreement. The following information about the lease and the trailersis provided:1. Equal annual payments that are due on January 1 each year provideHayes Corp. with an 8% return on net investment (present value factorfor 6 periods at 8% is 4.99271).2. Titles to the trailers pass to Lester at the end of the lease.3. The fair value of each trailer is $60,000. The cost of each trailer to HayesCorp. is $54,000. Each trailer has an expected useful life of nine years.4. Collectibility of the lease payments is probable.answer please:1. What type of lease is this for the lessor? Discuss how you made the determination. 2. Calculate the annual lease payment. (Round to nearest dollar.)3. Prepare a lease amortization schedule for Hayes Corp. for the first three years.4. Prepare the journal entries for the lessor for 2021 to record the leaseagreement, the receipt of the lease rentals, and the recognition of revenue (assume the use of a perpetual inventory method and round all amounts to the nearest dollar). Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, HayesCorp. leases ten trailers to Lester Company under a six-year noncancelablelease agreement. The following information about the lease and the trailersis provided:1. Equal annual payments that are due on January 1 each year provideHayes Corp. with an 8% return on net investment (present value factorfor 6 periods at 8% is 4.99271).2. Titles to the trailers pass to Lester at the end of the lease.3. The fair value of each trailer is $60,000. The cost of each trailer to HayesCorp. is $54,000. Each trailer has an expected useful life of nine years.4. Collectibility of the lease payments is probable.Instructions:1. What type of lease is this for the lessor? Discuss how you made thedetermination.2. Calculate the annual lease payment. (Round to nearest dollar.)3. Prepare a lease amortization schedule for Hayes Corp. for the first threeyears.4. Prepare the journal entries for the lessor for 2021 to record the leaseagreement, the receipt of the lease rentals, and the recognition ofrevenue (assume the use of a perpetual inventory method and round allamounts to the nearest dollar).

ANSWER:- 1. It is a sales-type lease to the lessor, Hayes Corp. Hayes’s (the manufacturer) profit upon sale is $60,000, which is recognized in the year of sale (2018). It is not an operating lease because title to the assets passes to the lessee, and the present value ($600,000) of the lease payments equals or exceeds 90% ($540,000) of the fair value of the leased trailers. 2. Calculation Of Annual Lease Payment annual lease payment =lease amount /annuity factor =($60,000 x 10 trailers)/4.99271 =$120,175 3. LEASE AMORTIZATION SCHEDULE FOR HAYES CORPORATION FOR FIRST THREE YESRS year Initial balance (opening balance) Instalment Amount Interest Principal Balance (closing balance) 1. 600,000 $ 120,175 $ 4800 $ 72,175 $ 527,825 2. 527,825 $ 120,175 $ 42,226 $ 77,949 $ 449,876 3. 449,876 $ 120,175 $ 35,990 $84,185 $ 365,691 4. JOURNAL ENTRIES FOR LESSOR (HAYES CORPORATION) DATE PARTICULARS DEBIT CREDIT 1-1-2021 Lease receivable $ 600,000 To profit $ 60,000 To equipment $ 540,000 (to record lease and profit on sale) 31-12-2021 Cash $ 120,175 To lease receivable $ 72,175 To interest revenue $ 48,000 (to record lease receivable)

Answered: Hayes Corp. is a manufacturer of truck…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, Hayes
Corp. leases ten trailers to Lester Company under a six-year noncancelable
lease agreement. The following information about the lease and the trailers
is provided:
1. Equal annual payments that are due on January 1 each year provide
Hayes Corp. with an 8% return on net investment (present value factor
for 6 periods at 8% is 4.99271).
2. Titles to the trailers pass to Lester at the end of the lease.
3. The fair value of each trailer is $60,000. The cost of each trailer to Hayes
Corp. is $54,000. Each trailer has an expected useful life of nine years.
4. Collectibility of the lease payments is probable.

answer please:
1. What type of lease is this for the lessor? Discuss how you made the determination.

2. Calculate the annual lease payment. (Round to nearest dollar.)

3. Prepare a lease amortization schedule for Hayes Corp. for the first three years.

4. Prepare the journal entries for the lessor for 2021 to record the lease
agreement, the receipt of the lease rentals, and the recognition of revenue (assume the use of a perpetual inventory method and round all amounts to the nearest dollar).

Hayes Corp. is a manufacturer of truck trailers. On January 1, 2021, Hayes
Corp. leases ten trailers to Lester Company under a six-year noncancelable
lease agreement. The following information about the lease and the trailers
is provided:
1. Equal annual payments that are due on January 1 each year provide
Hayes Corp. with an 8% return on net investment (present value factor
for 6 periods at 8% is 4.99271).
2. Titles to the trailers pass to Lester at the end of the lease.
3. The fair value of each trailer is $60,000. The cost of each trailer to Hayes
Corp. is $54,000. Each trailer has an expected useful life of nine years.
4. Collectibility of the lease payments is probable.
Instructions:
1. What type of lease is this for the lessor? Discuss how you made the
determination.
2. Calculate the annual lease payment. (Round to nearest dollar.)
3. Prepare a lease amortization schedule for Hayes Corp. for the first three
years.
4. Prepare the journal entries for the lessor for 2021 to record the lease
agreement, the receipt of the lease rentals, and the recognition of
revenue (assume the use of a perpetual inventory method and round all
amounts to the nearest dollar).

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