On January 1, 2021, Harry Company leased ten trailers to Jennifer Company under a five- year non-cancelable lease agreement. The following provides information about the lease and the trailers: 1.-For each trailer, the fair value is €65,000, cost is €44,000, and expected useful life is 7 years. 2.-Equal annual payments that are due on January 1 each year provide Harry with a 6% return on net investment. 3.-Titles to the trailers pass to Jennifer at the end of the lease. 4.→Collectability of the lease payments is probable.“ Required (a) → Calculate the annual lease payment. (Round to the nearest dollar.) → (b)-Prepare a lease amortization schedule for Harry for the first three years. (c) - Prepare the joumal 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).

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question 2
On January 1, 2021, Harry Company leased ten trailers to Jennifer Company under a five-
year non-cancelable lease agreement. The following provides information about the lease and
the trailers:
1.-For each trailer, the fair value is €65,000, cost is €44,000, and expected useful life is 7-
years.
2.→Equal annual payments that are due on January 1 each year provide Harry with a 6%
return on net investment.
3.→Titles to the trailers pass to Jennifer at the end of the lease.
4.→Collectability of the lease payments is probable.
Required
(a) → Calculate the annual lease payment. (Round to the nearest dollar.) →
(b)- Prepare alease amortization schedule for Harry for the first three years.
(c) -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).
Transcribed Image Text:Question 2 On January 1, 2021, Harry Company leased ten trailers to Jennifer Company under a five- year non-cancelable lease agreement. The following provides information about the lease and the trailers: 1.-For each trailer, the fair value is €65,000, cost is €44,000, and expected useful life is 7- years. 2.→Equal annual payments that are due on January 1 each year provide Harry with a 6% return on net investment. 3.→Titles to the trailers pass to Jennifer at the end of the lease. 4.→Collectability of the lease payments is probable. Required (a) → Calculate the annual lease payment. (Round to the nearest dollar.) → (b)- Prepare alease amortization schedule for Harry for the first three years. (c) -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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