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Recording Operating Lease Entries-Lessor On January 1, Lessee Inc. leased equipment at an annual payment of $93,609 payable at the beginning of each year for 4 years. The equipment had a fair value of $440,000, a book value of $412,500, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $137,500, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. Required a. Recalculate the lessor's lease payment. Note: Round answer to the nearest dollar. Note: Do not use a negative sign with your answer. Lease payment $ 0 b. Prepare the entries for the lessor for the year, assuming that the lessor uses the straight-line method to depreciate fixed assets. Account Name Dr. Date Jan. 1 Dec. 31 Dec. 31 ♦ ● To record receipt of lease payment To record revenue Dec. 31 ● + ● ◆ 0 0 0 0 0 0 Cr. 0 0 0 0 0 0 0 0 To record depreciation c. If the lessor incurred a commission to secure the acceptance of the lease agreement for $1,100, what entry would be required by the lessor on January 1 and December 31? Account Name Dr. Cr. Date Jan. 1 0 0 + ● ◆ + d. How would the lease be classified if instead, the lessee guaranteed a residual value of $88,000? Lease classification considering guaranteed residual value 0 0 0 0 O

Recording Operating Lease Entries-Lessor On January 1, Lessee Inc. leased equipment at an annual payment of $93,609 payable at the beginning of each year for 4 years. The equipment had a fair value of $440,000, a book value of $412,500, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $137,500, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. Required a. Recalculate the lessor's lease payment. Note: Round answer to the nearest dollar. Note: Do not use a negative sign with your answer. Lease payment $ 0 b. Prepare the entries for the lessor for the year, assuming that the lessor uses the straight-line method to depreciate fixed assets. Account Name Dr. Date Jan. 1 Dec. 31 Dec. 31 ♦ ● To record receipt of lease payment To record revenue Dec. 31 ● + ● ◆ 0 0 0 0 0 0 Cr. 0 0 0 0 0 0 0 0 To record depreciation c. If the lessor incurred a commission to secure the acceptance of the lease agreement for $1,100, what entry would be required by the lessor on January 1 and December 31? Account Name Dr. Cr. Date Jan. 1 0 0 + ● ◆ + d. How would the lease be classified if instead, the lessee guaranteed a residual value of $88,000? Lease classification considering guaranteed residual value 0 0 0 0 O

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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Recording Operating Lease Entries-Lessor On January 1, Lessee Inc. leased equipment at an annual payment of $93,609 payable at the beginning of each year for 4 years. The equipment had a fair value of $440,000, a book value of $412,500, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $137,500, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. Required a. Recalculate the lessor's lease payment. Note: Round answer to the nearest dollar. Note: Do not use a negative sign with your answer. Lease payment $ b. Prepare the entries for the lessor for the year, assuming that the lessor uses the straight-line method to depreciate fixed assets. Account Name Dr. Date Jan. 1 Dec. 31 Dec. 31 ◆ To record receipt of lease payment To record revenue Dec. 31 → → 수 + 0 0 0 0 0 0 Cr. 0 0 0 0 0 0 0 0 0 To record depreciation c. If the lessor incurred a commission to secure the acceptance of the lease agreement for $1,100, what entry would be required by the lessor on January 1 and December 31? Account Name Dr. Cr. Date Jan. 1 0 0 + + + d. How would the lease be classified if instead, the lessee guaranteed a residual value of $88,000? Lease classification considering guaranteed residual value 0 0 0 O
Transcribed Image Text:Recording Operating Lease Entries-Lessor On January 1, Lessee Inc. leased equipment at an annual payment of $93,609 payable at the beginning of each year for 4 years. The equipment had a fair value of $440,000, a book value of $412,500, and was commonly purchased or leased by customers. The lessor estimates that the equipment has an estimated useful life of 8 years and an estimated residual value of $137,500, not guaranteed by the lessee. Lessor's implicit rate is 7.5%, which is unknown to the lessee. The lessee's incremental borrowing rate is 8%. The lease does not contain a purchase option or a renewal option. The lessee had no other costs associated with this lease. Required a. Recalculate the lessor's lease payment. Note: Round answer to the nearest dollar. Note: Do not use a negative sign with your answer. Lease payment $ b. Prepare the entries for the lessor for the year, assuming that the lessor uses the straight-line method to depreciate fixed assets. Account Name Dr. Date Jan. 1 Dec. 31 Dec. 31 ◆ To record receipt of lease payment To record revenue Dec. 31 → → 수 + 0 0 0 0 0 0 Cr. 0 0 0 0 0 0 0 0 0 To record depreciation c. If the lessor incurred a commission to secure the acceptance of the lease agreement for $1,100, what entry would be required by the lessor on January 1 and December 31? Account Name Dr. Cr. Date Jan. 1 0 0 + + + d. How would the lease be classified if instead, the lessee guaranteed a residual value of $88,000? Lease classification considering guaranteed residual value 0 0 0 O
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How do you calculate the selling expense and intital direct cost journal entry values on December 31 in part c?

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