On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified the following: a. Ten annual payments of $55,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $316,412. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5.000 per year are specified, beginning January 1, 2021. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. e. A partial amortization schedule, appropriate for both the lessee'and lessor, follows: (EV of $1. PV.ol$1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $) (Use appropriate factor(s) from the tables provided.) Decrease in Halance Outstanding Balance Effective Interest (12% N Outstanding balance) Rayments 1/1/2021 12/31/2021 12/11/2022 50,000 (50,000 50,000 0.12 (266,412)- 31,969 0.12 (248, 381)- 29,806 50, 000 18,031 20, 194 316,412 266,412 248, 381 228, 187 Required: 1. Piepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. 2. Prepare the approprlate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Transcribed Image Text:Chapter 15 Homework Seved On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to ean NRC a 12% rate of return for providing long-term financing. The lease agreement specified the following: a. Ten annual payments of $55,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $316,412. c The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2021. NRC was to pay this cost as incurred, but lease payments refiect this expenditure. e. A partial amortization schedule, appropriate for both the lessee'and lessor, follows: Wnces (EV of $1. PV.of $1 EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1 (Use oppropriate factor(s) from the tables provided.) Outstanding Balance Decrease in Balance Rayments Effective Interest (12% * Outstanding balance) 316,412 266, 412 1/1/2021 12/31/202 12/31/2022 50,e00 se, 000 50,000 0.12 (266,412) - 31,969 B.12 (248, 381) - 29,806 50, 000 18,031 20, 194 248, 381 228, 187 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1. 2021 and December 31, 2021. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021 Complete this question by entering your answers in the tabs below. Required 1 Required 2 ( Prey 9 of 10 Next> shere to search

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions