On january 1 2011 palmer company leased equipment to woods

Reference no: EM13579292

On January 1, 2011, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.
The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease.

Equal rental payments are due on January 1 of each year, beginning in 2011.
The fair value of the equipment on January 1, 2011, is $200,000, and its cost is $150,000.
The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,000. Woods depreciates all of its equipment on a straight-line basis.
Palmer set the annual rental to ensure an 11% rate of return. Woods's incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown.

Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor.
(a) Answer the following questions. What type of lease is recorded by Palmer? What type of lease is recorded by Woods?

(b) Calculate the amount of the annual rental payment. (Round your answer to the nearest dollar eg 58,971.)

(c) Prepare all the necessary journal entries for Woods for 2011. d) Prepare all the necessary journal entries for Palmer for 2011.

Reference no: EM13579292

Questions Cloud

Gucho company which is located in buenos aires argentina : gaucho company which is located in buenos aires argentina manufactures a component used in farm machinery. the

The life expectancy of a common brand of battery is : the life expectancy of a common brand of battery is normally distributed with a mean of 400 hours and a standard

Nolan mills uses a standard cost system during may nolan : nolan mills uses a standard cost system. during may nolan manufactured 15000 pillowcases using 27600 yards of fabric

The marketing department of graber corporation has : the marketing department of graber corporation has submitted the following sales forecast for the upcoming fiscal

On january 1 2011 palmer company leased equipment to woods : on january 1 2011 palmer company leased equipment to woods corporation. the following information pertains to this

Develop a regression model to identify the fixed overhead : the managing director of a consulting group has the following monthly data on total overhead costs and professional

Suppose that the number of flaws in a certain type of : suppose that the number of flaws in a certain type of magnetic tape is on average three per 500ft. assuming a poisson

Heesacker inc uses a process cost accounting system the : heesacker inc. uses a process cost accounting system. the following operating and cost data occurred during

How do retiree health benefits differ from pension : how do retiree health benefits differ from pension benefits with respect to accounting funding regulation and employee

User Account

All Pages