{"id":77600,"date":"2018-02-20T23:50:30","date_gmt":"2018-02-20T23:50:30","guid":{"rendered":"https:\/\/writemyessayfree.com\/lessee-lessor-entries"},"modified":"2017-08-18T07:15:19","modified_gmt":"2017-08-18T07:15:19","slug":"lessee-lessor-entries","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/lessee-lessor-entries\/","title":{"rendered":"Lessee-Lessor Entries"},"content":{"rendered":"

Lessee-Lessor Entries (30 points)<\/strong><\/p>\n

Ford Motor Credit agrees to lease a Ford Mustang to Bullitt Detective Agency, Inc. on Jan. 1, 2015. The following information relates to the lease agreement.<\/p>\n

1. The term of the lease is 3 years non-cancelable, with 2 renewal options of one year each. The car has an expected life of 8 years.<\/p>\n

2. Bullitt\u2019s incremental borrowing rate is 5.5% apr. The implicit interest rate used by Ford is 4.3% apr and is known to Bullitt (after all, they are the best detective agency in San Francisco).<\/p>\n

3. The cost of the car is $19,500, and the fair value of the Mustang on 1\/1\/2015 is $32,800.<\/p>\n

4. At the end of the lease term, the Mustang reverts to Ford and has a guaranteed residual value of $4,000. Bullitt depreciates all of its cars on a sum-of-the-years basis because it knows that cars lose most of their value in the first few years.<\/p>\n

5. A termination penalty assures renewal of the lease for a period of 1 year after the expiration of the lease.<\/p>\n

6. An option allowing Bullitt to extend the lease beyond the last renewal is exercised by Bullitt (Why give a Mustang back sooner than you have to?)<\/p>\n

7. The lease agreement requires equal 6-month payments beginning on Jan. 1, 2015.<\/p>\n

8. Given the high probability of damaging a car leased to a detective agency, Ford decides to require Bullitt to purchase casualty insurance. The amount per 6 month\u2019s is $3000. The payment of the insurance is to be included in lease payment made every 6 months.<\/p>\n

9. The collectability of the lease payments is reasonably predictable, and there is no important uncertainties surrounding the amount of costs to be incurred by the Ford.<\/p>\n

Instructions<\/strong><\/p>\n

a. Tell me what kind of lease this is for both Bullitt and Ford. Be specific and give the reason why you think it is this type of lease.<\/p>\n

b. Compute the present value of the minimum lease payments. (Hint: How do you handle the residual value?)<\/p>\n

c. Calculate the amount of the total rental payment required.<\/p>\n

d. Prepare a lease amortization for Bullitt using the guaranteed residual value for 2015 and 2016. (Do not include the executory costs in your lease amortization schedule.)<\/p>\n

e. Prepare the journal entries Bullitt would make in 2015. Be sure to include any year end adjustments that need to be made.<\/p>\n

f. Prepare the journal entries Ford would make in 2015.<\/p>\n

 <\/p>\n

Lease work space<\/p>\n","protected":false},"excerpt":{"rendered":"

Lessee-Lessor Entries (30 points) Ford Motor Credit agrees to lease a Ford Mustang to Bullitt Detective Agency, Inc. on Jan. 1, 2015. The following information relates to the lease agreement. 1. The term of the lease is 3 years non-cancelable, Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-77600","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/77600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=77600"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/77600\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=77600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=77600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=77600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}