Terms of a lease agreement and related facts were as follows: a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction Incurred by the lessor were $4,261. b. The retall cash selling price of the leased asset was $502,000. Its useful life was three years with no residual value. c. The lease term was three years and the lessor paid $502,000 to acquire the asset. d. Annual lease payments at the beginning of each year were $185,068. e. Lessor's Implicit rate when calculating annual rental payments was 11%. Required: 1. Prepare the appropriate entries for the lessor to record the lease and related payments at its beginning. January 1, 2021. 2. Calculate the effective rate of Interest revenue after adjusting the net Investment by Initial direct costs. 3. Record any entry(s) necessary at December 31, 2021, the fiscal year-end. (Prepare any entry(s) recorded by the lessor at December 31, 2021, Its fiscal year-end.)

Terms of a lease agreement and related facts were as follows: a. Incremental costs of commissions for brokering the lease and consummating the completed lease transaction Incurred by the lessor were $4,261. b. The retall cash selling price of the leased asset was $502,000. Its useful life was three years with no residual value. c. The lease term was three years and the lessor paid $502,000 to acquire the asset. d. Annual lease payments at the beginning of each year were $185,068. e. Lessor's Implicit rate when calculating annual rental payments was 11%. Required: 1. Prepare the appropriate entries for the lessor to record the lease and related payments at its beginning. January 1, 2021. 2. Calculate the effective rate of Interest revenue after adjusting the net Investment by Initial direct costs. 3. Record any entry(s) necessary at December 31, 2021, the fiscal year-end. (Prepare any entry(s) recorded by the lessor at December 31, 2021, Its fiscal year-end.)

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Terms of a lease agreement and related facts were as follows:
a. Incremental costs of commissions for brokering the lease and consummating the completed lease
transaction incurred by the lessor were $4,261.
b. The retail cash selling price of the leased asset was $502,000. Its useful life was three years with no residual
value.
c. The lease term was three years and the lessor paid $502,000 to acquire the asset.
d. Annual lease payments at the beginning of each year were $185,068.
e. Lessor's Implicit rate when calculating annual rental payments was 11%.
Required:
1. Prepare the appropriate entries for the lessor to record the lease and related payments at its beginning.
January 1, 2021.
2. Calculate the effective rate of Interest revenue after adjusting the net Investment by Initial direct costs.
3. Record any entry(s) necessary at December 31, 2021, the fiscal year-end. (Prepare any entry(s) recorded by
the lessor at December 31, 2021, Its fiscal year-end.)

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