acc422 final exam

Exercise 21-8 (Part Level Submission)
The following facts pertain to a noncancelable lease agreement between Windsor Leasing Company and Sheridan Company, a lessee.

Inception date: May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017 $21,737.01
Bargain-purchase OPTION PRICE at end of lease term $3,800
Lease term 5 years
Economic life of leased equipment 10 years
Lessor?s cost $68,000
Fair value of asset at May 1, 2017 $93,000
Lessor?s implicit rate 10 %
Lessee?s incremental borrowing rate 10 %

The collectibility of the lease payments is reasonably predictable, and there are no IMPORTANT uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

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(c)

Partially correct answer. Your answer is partially correct. Try again.

Prepare a lease amortization schedule for Sheridan Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and Round answers to 2 decimal places, e.g. 15.25.)

SHERIDAN COMPANY (Lessee)

Lease Amortization Schedule
Date

Annual Lease Payment Plus

BPO

Interest on

Liability

Reduction of Lease

Liability

Lease Liability
5/1/17
$Entry field with correct answer

$Entry field with correct answer

$Entry field with correct answer

$Entry field with incorrect answer
90,640.50
5/1/17
Entry field with correct answer
$21,737.03

Entry field with correct answer
0.00

Entry field with correct answer
21,737.03

Entry field with incorrect answer
68,903.47
5/1/18
Entry field with correct answer
$21,737.03

Entry field with incorrect answer
6,890.35

Entry field with incorrect answer
14,846.69

Entry field with incorrect answer
54,056.78
5/1/19
Entry field with correct answer
$21,737.03

Entry field with incorrect answer
5,405.68

Entry field with incorrect answer
16,331.35

Entry field with incorrect answer
37,725.43
5/1/20
Entry field with correct answer
$21,737.03

Entry field with incorrect answer
3,772.54

Entry field with incorrect answer
17,964.49

Entry field with incorrect answer
19,760.94
5/1/21
Entry field with correct answer
$21,737.03

Entry field with incorrect answer
1,976.09

Entry field with incorrect answer
19,760.94

Entry field with incorrect answer
0
4/30/22
Entry field with incorrect answer
$21,737.03

Entry field with incorrect answer

Entry field with incorrect answer
Entry field with correct answer

$Entry field with incorrect answer

$Entry field with incorrect answer

$Entry field with incorrect answer

Question 28
On January 1, 2017, Bonita Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Bonita to make annual payments of $8,026 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $4,900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Bonita uses the straight-line method of depreciation for all of its plant assets. Bonita?s incremental borrowing rate is 10%, and the lessor?s implicit rate is unknown.

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COMPUTEthe present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

The present value of the minimum lease payments
$

Prepare all necessary journal entries for Bonita for this lease through January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.)

Date
Account Titles and Explanation
Debit
Credit

Leased Equipment

Lease Liability

(To record the lease.)

Lease Liability

8026

Cash

8026

(To record first payment.)

Depreciation Expense

Accumulated Depreciation-Capital Leases

(To record depreciation.)

Interest Expense

Interest Payable

(To record interest.)

1/1/18

Lease Liability

Interest Payable

Cash

(To record second payament.)

Question 27
PEARLCorporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicator that had cost $100,000 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $40,200 payable each January 1, beginning January 1, 2017. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs.

Prepare Pearl?s January 1, 2017, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

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Date
Account Titles and Explanation
Debit
Credit
January 1, 2017

Lease Receivable

Sales Revenue

(To record the lease.)

January 1, 2017

Cost of Goods Sold

100,000

Inventory

100,000

(To record cost.)

January 1, 2017

Cash

40,200

Lease Receivable

40,200

(To record first lease payment.)