Q3. Tyrion Leasing Company signs an agreement on January 1, 2017, to lease equipment to Sansa Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed. 4. Sansa Company assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2017. 6. Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. Instructions (a) Assuming the lessor desires a 10% rate of return on its investment; calculate the amount of the annual payment required. (Round to the nearest dollar.) (b) Prepare an amortization schedule that would be suitable for the lessor for the lease term. (c) Prepare all of the journal entries for the lessor for 2017 and 2018 to record the lease agreement, the receipt rental of lease payments, and the recognition of income. Assume the lessor's annual accounting period ends on December 31.
Q3. Tyrion Leasing Company signs an agreement on January 1, 2017, to lease equipment to Sansa Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $43,622, none of which is guaranteed. 4. Sansa Company assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2017. 6. Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. Instructions (a) Assuming the lessor desires a 10% rate of return on its investment; calculate the amount of the annual payment required. (Round to the nearest dollar.) (b) Prepare an amortization schedule that would be suitable for the lessor for the lease term. (c) Prepare all of the journal entries for the lessor for 2017 and 2018 to record the lease agreement, the receipt rental of lease payments, and the recognition of income. Assume the lessor's annual accounting period ends on December 31.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Q3. Tyrion Leasing Company signs an agreement on January 1, 2017, to lease equipment to Sansa Company.
The following information relates to this agreement.
1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated
economic life of 6 years.
2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2017, is $245,000.
3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a
residual value of $43,622, none of which is guaranteed.
4. Sansa Company assumes direct responsibility for all executory costs.
5. The agreement requires equal annual rental payments, beginning on January 1, 2017.
6. Collectability of the lease payments is reasonably predictable. There are no important uncertainties
surrounding the amount of costs yet to be incurred by the lessor.
Instructions
(a) Assuming the lessor desires a 10% rate of return on its investment; calculate the amount of the annual
rental payment required. (Round to the nearest dollar.)
(b) Prepare an amortization schedule that would be suitable for the lessor for the lease term.
(c) Prepare all of the journal entries for the lessor for 2017 and 2018 to record the lease agreement, the receipt
of lease payments, and the recognition of income. Assume the lessor's annual accounting period ends on
December 31.
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