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Using time value of money tables, a financial calculator, or Excel functions, calculate the amount of each of the following: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) 1. 2. 3. Gross investment Unearned interest income. Net investment in the lease $ $

Using time value of money tables, a financial calculator, or Excel functions, calculate the amount of each of the following: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) 1. 2. 3. Gross investment Unearned interest income. Net investment in the lease $ $

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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D4.

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Wildhorse Corporation is a machinery dealer whose shares trades on the TSX, and so it uses IFRS 16. Wildhorse leased a machine to Ernst Ltd. on January 1, 2020. The lease is for a six-year period and requires equal annual payments of $24,792 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine for its inventory during 2019 for $100,700. Collectibility of lease payments is reasonably predictable, and no important uncertainties exist about costs that have not yet been incurred by Wildhorse. Wildhorse set the annual rental amount to ensure an 11% rate of return. The machine has an economic life of six years, with no residual value, and reverts to Wildhorse at the termination of the lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using time value of money tables, a financial calculator, or Excel functions, calculate the amount of each of the following: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) 1. 2. 3. Gross investment Unearned interest income Net investment in the lease $ $ $
Transcribed Image Text:Wildhorse Corporation is a machinery dealer whose shares trades on the TSX, and so it uses IFRS 16. Wildhorse leased a machine to Ernst Ltd. on January 1, 2020. The lease is for a six-year period and requires equal annual payments of $24,792 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine for its inventory during 2019 for $100,700. Collectibility of lease payments is reasonably predictable, and no important uncertainties exist about costs that have not yet been incurred by Wildhorse. Wildhorse set the annual rental amount to ensure an 11% rate of return. The machine has an economic life of six years, with no residual value, and reverts to Wildhorse at the termination of the lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using time value of money tables, a financial calculator, or Excel functions, calculate the amount of each of the following: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) 1. 2. 3. Gross investment Unearned interest income Net investment in the lease $ $ $
Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts, Round answers to 0 decimal places, eg. 5,275.) Account Titles and Explanation Date 1/1/20 (To record inception of lease and cost of goods sold.) Show Transcribed Text (To record inception of lease and cost of goods sold.) (To record interest.) Debit Credit
Transcribed Image Text:Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts, Round answers to 0 decimal places, eg. 5,275.) Account Titles and Explanation Date 1/1/20 (To record inception of lease and cost of goods sold.) Show Transcribed Text (To record inception of lease and cost of goods sold.) (To record interest.) Debit Credit
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