4.
On December 31, 2018, Rhone-Metro Industries leased equipment to Western Soya Co. for a four-year period ending December 31, 2022, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost Rhone-Metro $402,611 and has an expected useful life of six years. Its normal sales price is $402,611. The lessee-guaranteed residual value at December 31, 2022 is $20,000. Equal payments under the lease are $110,000 and are due on December 31 of each year. The first payment was made on December 31, 2018 Western Soya's incremental borrowing rate is 1western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation. Use (EV offi, PV of $1, FVA of $1. PVAofSLEVAD of31 and PVAD of (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $110,000 annual lease payments. 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessorj? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2018. 4. Prepare an amortization schedulels) describing the pattern of interest over the lease term for the lessee and the lessor 5. Prepare all appropriate entries for both Western Soya and Rnone-Metro on December 31, 2019 (the second lease payment and 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,200 Show how Rhone-Metro calculated the $110,000 annual lease payments. Gu Table or calculator function of $1 9% Present Value Amount to be recovered Presont value of the guarantoed residual value Amount to be recovered through periodic lease payments of $1 Table or calculator function 9% Lease Leaso payments at the beginning of oach of the next four yoars Prepare the appropriate entries for Western Soya Co. on December 31, 2018. (If no entry is required for a transaction/event, select No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Debit Right-of-use asset Lease payable December 3 Lase payable Cash Prepare the appropriate entries for Rhone-Metro on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Date General Journa Debit Lease receivable Cash 2018 Lease receivable Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Effective Decrease in Outstanding Balance 2018 2018 2019 2020 2021 2022 Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your ntermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Effective 2018 2018 2019 2020 2021 Required 4 lessor Prepare all appropriate entries for Western Soya on December 31, 2019 (the second lease payment and depreciation). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet Date General Journal Debit Credit No Interast axpense 2019 Lease payable Cash 19 Prepare all appropriate entries for Rhone-Metro on December 31, 2019 (the second lease payment and depreciation). (If no entry is required for a transaction/event, select 'No journal entry required" in the first account field.) View transaction list view journal entry worksheot No Date Debit Credit December 31 Cash Lease receivable Intorost rovenuo Prepare the appropriate entries for both Western Soya on December 31, 2022 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Date General Journal Debit Credit December 31 2022 Amortization axpense Roght-of-use asaet Decamber 31 Loss on residual value guarantee Cash Prepare the appropriate entries for Rhone-Metro on December 31, 2022 assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Date General Journal Debit Credit December 31 Equipmen 2022 Cash Lease receivable Interest revenue Show transcribed image text
