Markus Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/20, Markus leased a complete computer system to Bellis Enterprises. Data relating to the lease follow: Cost of equipment to Markus $72,000 Fair market value of equipment at 1/1/20 $95,000 Useful life of equipment 8 years Lease term 5 years Residual value at the end of the lease (guaranteed by Bellis) $12,000 Residual value expected by Bellis $9,000 Implicit and incremental interest rates 8% Initial direct costs incurred by Bellis in negotiation $2,000 Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31. Required: a. Calculate the yearly payment that Markus will charge Bellis under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20. b. Prepare all journal entries that would be made by Markus (lessor) during 2020 and 2021 relating to this lease. c. Prepare all journal entries that would be made by Bellis (lessee) during 2020 and 2021 relating to this lease. d. Prepare the journal entries made by both Markus and Bellis with respect to the lease termination if the actual residual value of the computer equipment is $10,000
Markus Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/20, Markus leased a complete
computer system to Bellis Enterprises. Data relating to the lease follow:
Cost of equipment to Markus $72,000
Fair market value of equipment at 1/1/20 $95,000
Useful life of equipment 8 years
Lease term 5 years
Residual value at the end of the lease
(guaranteed by Bellis) $12,000
Residual value expected by Bellis $9,000
Implicit and incremental interest rates 8%
Initial direct costs incurred by Bellis in negotiation $2,000
Both the lessor and lessee use straight-line
Required:
a. Calculate the yearly payment that Markus will charge Bellis under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20.
b. Prepare all
c. Prepare all journal entries that would be made by Bellis (lessee) during 2020 and 2021 relating to this lease.
d. Prepare the journal entries made by both Markus and Bellis with respect to the lease termination if the actual residual value
of the computer equipment is $10,000.
Answer all subparts.if answered within 1hr,it would be helpful.pls asap
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
