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Terms of a lease agreement and related facts were: a. The lease asset had a retail cash selling price of $108,000. Its useful Iife was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $22,571, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2.362 for legal fees for the lease execution were the responsibility of the lessor. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $108,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $108,000 to acquire the asset Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest to 9% 3. The lease term is six years and the lessor paid $88,000 to acquire the asset.

Terms of a lease agreement and related facts were: a. The lease asset had a retail cash selling price of $108,000. Its useful Iife was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $22,571, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2.362 for legal fees for the lease execution were the responsibility of the lessor. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $108,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $108,000 to acquire the asset Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest to 9% 3. The lease term is six years and the lessor paid $88,000 to acquire the asset.

FINANCIAL ACCOUNTING
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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Terms of a lease agreement and related facts were: a. The lease asset had a retail cash selling price of $108,000. Its useful Iife was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $22,571, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2.362 for legal fees for the lease execution were the responsibility of the lessor. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $108,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $108,000 to acquire the asset Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest to 9% 3. The lease term is six years and the lessor paid $88,000 to acquire the asset.
Transcribed Image Text:Terms of a lease agreement and related facts were: a. The lease asset had a retail cash selling price of $108,000. Its useful Iife was six years with no residual value (straight-line depreciation). b. Annual lease payments at the beginning of each year were $22,571, beginning January 1. c. Lessor's implicit rate when calculating annual rental payments was 10%. d. Costs of $2.362 for legal fees for the lease execution were the responsibility of the lessor. Required: Prepare the appropriate entries for the lessor to record the lease, the initial payment at its beginning, and at the December 31 fiscal year-end under each of the following three independent assumptions: 1. The lease term is three years and the lessor paid $108,000 to acquire the asset (operating lease). 2. The lease term is six years and the lessor paid $108,000 to acquire the asset Also assume that adjusting the lease receivable (net investment) by initial direct costs reduces the effective rate of interest to 9% 3. The lease term is six years and the lessor paid $88,000 to acquire the asset.
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