Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment toWestern Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revertback to Rhone-Metro.●●The equipment cost $550,000 to manufacture and has an expected useful life of six years.Its normal sales price is $607,484.The expected residual value of $25,000 on December 31, 2028, is not guaranteed.Equal payments under the lease are $163,000 (including $3,000 maintenance costs) and are due on December 31 of each year.The first payment was made on December 31, 2024.Western Soya's incremental borrowing rate is 8%.Western Soya knows the interest rate implicit in the lease payments is 6%.Both companies use straight-line depreciation or amortization.Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)●Required:1. Show how Rhone-Metro calculated the $163,000 annual lease payments.2. How should this lease be classified (a) by Western Soya Company (the lessee) and (b) by Rhone-Metro Industries (the lessor)?3. Prepare the appropriate entries for both Western Soya Company and Rhone-Metro on December 31, 2024.4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor.5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025 (the second lease payment andamortization).6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2028, assuming the equipment isreturned to Rhone-Metro and the actual residual value on that date is $1,500.Complete this question by entering your answers in the tabs below.Required 1 Required 2Required 3LesseeRequired 3LessorRequired 4 Required 4LesseeLessorRequired 5LesseeRequired 5LessorRequired 6LesseeRequired 6Lessor

"Since you have asked a question with sub-parts more than three, as per guidelines, the first three…

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro.

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert back to Rhone-Metro.

FINANCIAL ACCOUNTING

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2024, Rhone-Metro leased equipment to
Western Soya Company for a four-year period ending December 31, 2028, at which time possession of the leased asset will revert
back to Rhone-Metro.
●
●
The equipment cost $550,000 to manufacture and has an expected useful life of six years.
Its normal sales price is $607,484.
The expected residual value of $25,000 on December 31, 2028, is not guaranteed.
Equal payments under the lease are $163,000 (including $3,000 maintenance costs) and are due on December 31 of each year.
The first payment was made on December 31, 2024.
Western Soya's incremental borrowing rate is 8%.
Western Soya knows the interest rate implicit in the lease payments is 6%.
Both companies use straight-line depreciation or amortization.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
●
Required:
1. Show how Rhone-Metro calculated the $163,000 annual lease payments.
2. How should this lease be classified (a) by Western Soya Company (the lessee) and (b) by Rhone-Metro Industries (the lessor)?
3. Prepare the appropriate entries for both Western Soya Company and Rhone-Metro on December 31, 2024.
4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor.
5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025 (the second lease payment and
amortization).
6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2028, assuming the equipment is
returned to Rhone-Metro and the actual residual value on that date is $1,500.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Lessee
Required 3
Lessor
Required 4 Required 4
Lessee
Lessor
Required 5
Lessee
Required 5
Lessor
Required 6
Lessee
Required 6
Lessor

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