Prepare the appropriate journal entries for both lessee

Reference no: EM13125608

On December 31, 2010, Lessor leased equipment to Lessee for a 4-year period ending December 31, 2014, at which time possession of the leased asset will revert back to Lessor. Lessor paid 731,520 (the normal sales price and fair value) for the equipment which has a useful life of 6 years. The lessee-guaranteed residual value at December 31, 2014, is $50,000. Equal payments under the lease are $200,000 and are due on December 31 of each year. The first payment was made on December 31, 2010. Collectability of the remaining lease payments is reasonably assured and there are no material cost uncertainties. The interest rate implicit in the lease payments is 10%. Both companies use straight-line depreciation.

Required:
1) Show how Lessor calculated the $200,000 annual lease payments.
2) How should this lease be classified (a) by Lessee (b) by Lessor? Why?
3) Prepare the appropriate journal entries for both Lessee and Lessor on December 31, 2010.
4) Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the Lessee and the Lessor.

Reference no: EM13125608

Questions Cloud

What was rigors gross margin for 2011 : Suppose there are 360 business days in the year. What was the number of days' sales outstanding in average receivables and the number of days' sales outstanding in average inventories for 2011, respectively.

Find margin of error for confidence interval for true mean : Find the margin of error for a 89% confidence interval for the true mean cost of textbooks of U of M students in one semester.

Determining facts about group theory : Give five interesting facts about group theory (or tensor calculus). Each one need only be 1 to just a few sentences - please list separately and under each fact provide any links to websites or pictures etc.

Emotional intelligence according to goleman : Name and describe the three qualities of emotional intelligence according to Goleman.if you were interviewing applicants for a position in your company and wanted to know whether they had emotional intelligence.how would you go about discovering that..

Prepare the appropriate journal entries for both lessee : Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the Lessee and the Lessor.

Determine c if the average cost per hour is the same : customer's time is worth $1 per hour and should be accounted for in the model. If customers arrive at a Poisson rate of 10 per hour, then what is the average cost per hour if Mary is hired? if Alice is hired?

Forensic-type fieldwork phase : What is meant by the forensic-type fieldwork phase of an audit?

Can a percent of change be negative : If the current assets in 2010 were 112,004 and in 2009 the current assets were 113,030 the change is -1,026. That would mean the percent of change is -.009%. Is this correct? Can a percent of change be negative? If so, is this the proper way to wr..

What molar ratio of benzoate ion to benzoic acid be required : What molar ratio of benzoate ion to benzoic acid would be required to prepare a buffer with a pH of 5.20? [Ka(C6H5COOH) = 6.5 × 10-5]

User Account

All Pages