Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,384 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine during 2019 for $130,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. (a.) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $ (b.) Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) (c.) Suppose the collectibility of the lease payments was not probable for Wildhorse. Prepare the necessary journal entry for the company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (d.) Suppose at the end of the lease term, Wildhorse receives the asset and determines that it actually has a fair value of $1,450 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Wildhorse at the end of the lease term. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)
Wildhorse Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,384 at the beginning of each year. The first payment is received on January 1, 2020. Wildhorse had purchased the machine during 2019 for $130,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 6%
(a.) Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)
| Amount of the lease receivable |
$
|
(b.) Prepare all necessary journal entries for Wildhorse for 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)
(c.) Suppose the collectibility of the lease payments was not probable for Wildhorse. Prepare the necessary
(d.) Suppose at the end of the lease term, Wildhorse receives the asset and determines that it actually has a fair value of $1,450 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Wildhorse at the end of the lease term. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)
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