Lessor Accounting with Unguaranteed Residual Value Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $1 00,000 to be made in advance at the beginning of each year.2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom.3. Davis agrees to pay all executory costs directly to a third party. 4. The interest rate implicit in the lease is 14%.5. The initial direct costs are insignificant and assumed to be zero. 6. It is probable that Edom will collect the lease payments.Required: 1. Next Level Assuming that the lease is a sales-type lease from Edom's point of view, calculate the selling price.2. Prepare a table summarizing the lease receipts and interest income earned by Edom.3. Prepare a table showing the accretion of the unguaranteed residual asset.4. Prepare journal entries for Edom, the lessor, for the years 2019 and 2020.
Lessor Accounting with Unguaranteed Residual Value Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $1 00,000 to be made in advance at the beginning of each year.
2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom.
3. Davis agrees to pay all executory costs directly to a third party.
4. The interest rate implicit in the lease is 14%.
5. The initial direct costs are insignificant and assumed to be zero.
6. It is probable that Edom will collect the lease payments.
Required:
1. Next Level Assuming that the lease is a sales-type lease from Edom's point of view, calculate the selling price.
2. Prepare a table summarizing the lease receipts and interest income earned by Edom.
3. Prepare a table showing the accretion of the unguaranteed residual asset.
4. Prepare
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