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On December 31, 2021, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone- Metro. The equipment cost Rhone-Metro $300,000 and has an expected useful life of six years. Its normal sales price is $365,760. The lessee- expected residual value on December 31, 2025, is $25,000. It is not guaranteed. Equal payments under the lease are $104,000 (including 4,000 maintenance cost) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !! 1.) Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !!

On December 31, 2021, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone- Metro. The equipment cost Rhone-Metro $300,000 and has an expected useful life of six years. Its normal sales price is $365,760. The lessee- expected residual value on December 31, 2025, is $25,000. It is not guaranteed. Equal payments under the lease are $104,000 (including 4,000 maintenance cost) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !! 1.) Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !!

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On December 31, 2021, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone- Metro. The equipment cost Rhone-Metro $300,000 and has an expected useful life of six years. Its normal sales price is $365,760. The lessee- expected residual value on December 31, 2025, is $25,000. It is not guaranteed. Equal payments under the lease are $104,000 (including 4,000 maintenance cost) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !! 1.) Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !!
Transcribed Image Text:On December 31, 2021, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone- Metro. The equipment cost Rhone-Metro $300,000 and has an expected useful life of six years. Its normal sales price is $365,760. The lessee- expected residual value on December 31, 2025, is $25,000. It is not guaranteed. Equal payments under the lease are $104,000 (including 4,000 maintenance cost) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 12%. Western Soya knows the interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !! 1.) Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. DO NOT USE PV TABLE !! USE A FINANCIAL CALCULATOR !!
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