Reference no: EM132529236

Question - Bravo Company, a machinery dealer, leased a machine to Turtle Corporation on January 1, 2017. The elements of the lease follow.

The lease is for an 8-year period and requires equal annual payments of $63,807 at the beginning of each year.

Payments are due at the beginning of each year. The first payment is received on January 1, 2017.

Bravo purchased the machine on 12/31/2016 for $376,000.

Collectability of lease payments by Bravo is probable.

Bravo priced the annual rental payments using a 6% rate of return.

The machine has an economic life of 9 years with no residual value and reverts to Bravo at the termination of the lease.

There is no purchase option and this machinery is not specialized in any way.

Required -

a) Concisely explain what type of lease this is to Bravo and why it is that type of lease.

b) Calculate the lease receivable for Bravo at the lease inception date. Show all calculations.

c) Prepare the journal entries for Bravo for all of 2017. Bravo's fiscal year began January 1 and ended December 31. Every entry must have an explanation and as part of it calculations must be shown.

d) Indicate what Bravo must report on the income statement related to this lease for the year ended December 31, 2017.

e) Indicate what Bravo must report on the classified balance sheet related to this lease as of December 31, 2017. OMIT CASH.