4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2021. The following information relates to the lease agreement. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2021, is $700,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2021. The collectibility of the lease payments is probable. The implicit rate of interest is 5%. 1. Compute lease payment (show lessor's calculation): 2. Complete amortization schedule: 1/1/2021 1/1/2022 1/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 January 1, 2021 Cash Pmt 3. Prepare lessee's and lessor's journal entries on the following dates: January 1, 2022 Jensen (Lessee) December 31, 2021 (Ignore accrual of interest) Effective Interest Principle reduction Catatanams Balance Glaus (Lessor) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Glaus Leasing Company agrees to lease equipment to Jensen Corporation on January 1, 2021. The following information relates to the lease agreement. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2021, is $700,000. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Jensen estimates that the expected residual value at the end of the lease term will be $50,000. Jensen amortizes all of its leased equipment on a straight-line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2021. The collectibility of the lease payments is probable. The implicit rate of interest is 5%. 1. Compute lease payment (show lessor's calculation): 2. Complete amortization schedule: 1/1/2021 1/1/2022 1/1/2023 1/1/2024 1/1/2025 1/1/2026 1/1/2027 January 1, 2021 Cash Pmt 3. Prepare lessee's and lessor's journal entries on the following dates: January 1, 2022 Jensen (Lessee) December 31, 2021 (Ignore accrual of interest) Effective Interest Principle reduction Catatanams Balance Glaus (Lessor)
