Problem 21-09 Ayayai Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Ayayai incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Ayayai has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%. Discuss the nature of this lease in relation to the lessor. This is a operating lease finance lease sales-type lease . Compute the amount of each of the following items. (1) Lease receivable $ (2) Sales price $ (3) Cost of sales $ Prepare a 10-year lease amortization schedule for Ayayai, the lessor. (Round answers to 0 decimal places e.g. 5,275.) AYAYAI COMPANY (Lessor) Lease Amortization Schedule Annuity Due Basis, Unguaranteed Residual Value Beginning of Year Annual Lease Payment Plus Residual Value Interest on Lease Receivable Lease Receivable Recovery Lease Receivable Initial PV $ $ $ $ 1 2 3 4 5 6 7 8 9 10 End of 10 $ $ $ Prepare all of the lessor’s journal entries for the first year. Account Titles and Explanation Debit Credit (To record the sale and the cost of goods sold in the lease transaction.) (To record payment of the initial direct costs relating to the lease.) (To record receipt of the first lease payment.)

Problem 21-09 Ayayai Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Ayayai incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Ayayai has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%. Discuss the nature of this lease in relation to the lessor. This is a operating lease finance lease sales-type lease . Compute the amount of each of the following items. (1) Lease receivable $ (2) Sales price $ (3) Cost of sales $ Prepare a 10-year lease amortization schedule for Ayayai, the lessor. (Round answers to 0 decimal places e.g. 5,275.) AYAYAI COMPANY (Lessor) Lease Amortization Schedule Annuity Due Basis, Unguaranteed Residual Value Beginning of Year Annual Lease Payment Plus Residual Value Interest on Lease Receivable Lease Receivable Recovery Lease Receivable Initial PV $ $ $ $ 1 2 3 4 5 6 7 8 9 10 End of 10 $ $ $ Prepare all of the lessor’s journal entries for the first year. Account Titles and Explanation Debit Credit (To record the sale and the cost of goods sold in the lease transaction.) (To record payment of the initial direct costs relating to the lease.) (To record receipt of the first lease payment.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 21-09

Ayayai Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $260,015, and its unguaranteed residual value at the end of the lease term is estimated to be $20,500. National will pay annual payments of $37,300 at the beginning of each year. Ayayai incurred costs of $195,000 in manufacturing the equipment and $4,100 in sales commissions in closing the lease. Ayayai has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 10%.

Discuss the nature of this lease in relation to the lessor.

This is a

operating lease finance lease sales-type lease

.

Compute the amount of each of the following items.

(1)	Lease receivable	$
(2)	Sales price	$
(3)	Cost of sales	$

Prepare a 10-year lease amortization schedule for Ayayai, the lessor. (Round answers to 0 decimal places e.g. 5,275.)

AYAYAI COMPANY (Lessor) Lease Amortization Schedule Annuity Due Basis, Unguaranteed Residual Value
Beginning of Year	Annual Lease Payment Plus Residual Value	Interest on Lease Receivable	Lease Receivable Recovery	Lease Receivable
Initial PV	$	$	$	$
1
2
3
4
5
6
7
8
9
10
End of 10
	$	$	$

Prepare all of the lessor’s journal entries for the first year.

Account Titles and Explanation	Debit	Credit




(To record the sale and the cost of goods sold in the lease transaction.)


(To record payment of the initial direct costs relating to the lease.)


(To record receipt of the first lease payment.)

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