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Posted on Jun 17, 2024

4. Pr.20-07 Sales-Type Lease with Receipts at End of Year Instructions Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning

4. Pr.20-07 Sales-Type Lease with Receipts at End of Year Instructions Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016. The lease terms, provisions, and related events are as follows: . The lease is noncancelable and has a term of 8 years. . The annual rentals are $32,000, payable at the end of each year. . Tilson agrees to pay all executory costs. . The interest rate implicit in the lease is 14%. . The cost of the equipment to the lessor is $110,000. . The lessor incurs no material initial direct costs. . The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. . The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years.PAGE 2016 PAGE 2017 PAGE 2019 GENERAL JOURNAL Score: 219/219 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Jan. 1 Lease Receivable 276,000.00 Cost of Asset Leased 102.988.82 Sales Revenue 148,443.65 Unearned Interest 120.545.17 Inventory 110,000.00 Dec. 31 Cash 32,000.00 Lease Receivable 32,000.00 Dec. 31 Unearned Interest 21,763.68 Interest Revenue: Leases 21,763.68 PAGE 2016 PAGE 2017 PAGE 2019 GENERAL JOURNAL Score: 219/219 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Dec. 31 Cash 32,000.00 Lease Receivable 32,000.00 Dec. 31 Unearned Interest 20.330.59 Interest Revenue: Leases 20,330.59PAGE 2016 PAGE 2017 PAGE 2019 GENERAL JOURNAL Score: 219/219 DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Dec. 31 Cash 32.000.00 Lease Receivable 32,000.00 Dec. 31 Unearned Interest 16.834.44 Interest Revenue: Leases 16.834.44 Points: 41 / 41 Feedback Check My Work Use the Lease Payments Received and Interest Revenue Earned Summary to determine amounts for entries.Balance Sheet Prepare partial balance sheets for Lamplighter for December 31, 2016, and December 31, 2017, showing how the accounts should be disclosed Additional Instructions Round your answers to the nearest cent. Use the present value of next year's payments to determine the current liability portion of the lease obligation. LAMPLIGHTER COMPANY Score: 16/16 Partial Balance Sheet December 31, 2016 and 2017 Assets 2016 2017 Current Assets: 3 Net investment in sales-type leases $28,070.18 $28.070.18 # Noncurrent Assets: 5 Net investment in sales-type leases $117,148.33 $105,478.92 Points: 4/4. The lease is noncancelable and has a term of 8 years. . The annual rentals are $32,000, payable at the end of each year. . The interest rate implicit in the lease is 14%.q **Annual rentals (or rental payments) is $32,000.1 **Present value of-8 years (amounts) in advance at-14% *Lamplighter Company has a contract (or stated) interest rate and annual coupon interest rate. (spa) of-14.0%. -Or, Lamplighter-Company pays-14.0% contract (or stated) interest rate and- annual coupon interest rate (cpa). T Now, I must refer to page-M-50 on-Table-4-Present Value of Ordinary Annuity of 1: Point= 1 1 - (1 +i) of Interest-Tables of-Compound Interest-Tables of-Chapter-5-The-Income-Statement- And-The-Statement-Of-Cash Flows to find-value for Present-value interest factor of an Ordinary- Annuity of -1.1\fAt the intersection of the n =-8 periods column and the i=-14% or-14.0% row, we find a value- for the Present-value interest-factor of Ordinary Annuity of-1 is-4.638864.1 =.$32,000-x-4.6388641 =-$148.443.6481 Round to the nearest hundredths, so it is $148,443.65.1 =-$148,443.651 [Method #2]T On a cell of a worksheet of-a-Microsoft Excel workbook:T =$32,000*PVIFA(8,14)1 =-$148,443.651 v The Tilson Company, the lessee, is willing to pay-$148,443.65-to use-Lamplighter-Company's leased equipment is present value, or present value of the future cash flows (or future income- stream). -Or, the current market price of Lamplighter Company's equipment is-$148,443.65.--Or; the selling price of Lamplighter Company's leased equipment is $148,443.65.-Lamplighter- Company's leased equipment is currently being priced in the market at $148,443.65.1**Present value of-8-years (amounts) in advance-at-14% . The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years. TABLE Present Value of 1: Pai = (1 + i)" . n 14.0% 0.877193 2 0.769468 3 0.674972 0.592080 5 0.519369 0.455587 7 0.399637 8 0.350559 5 At the intersection of then=-8 periods column and the i =-14% or-14.0% row, we find-a value- for the Present-value-interest factor of-1 is-0.350559.TTotal-Present value (or-Investment value, -Net investment value) of.Lease Payments .Formula =.Selling Price +-(Residual value-x -Present-value interest factor of-1)I =.Selling Price-+-Present value of unguaranteed residual valueT =Total-Present value (or-Investment-value, .Net investment value) of Lease Payments =$148,443.65+ ($20,000-x-0.350559)1 =$148,443.65+-$7,011.187 =-$155,454.835 14 = 100 =0.145 =-$155.455.83-x-0.141 =-$21,763.681 =.$32,000--$21,763.681-.$10,236.321 . The annual rentals are $32,000, payable at the end of each year. Interest Revenue Lease Payment Reduction of Net Unearned at 14% on Net Lease Receivable Net Investment Received Investment Interest: Leaves Investment -... $276,000.00--$120,545.17-$155,454.831 $32,000--$21,763.68-$10,236.32-$244,000.00--$98,781.49-$145,218.515 $32,000--$20,330.59--$11,669.41-$212,000.00--$78,450.90-$133,549.109 $32,000--$18,696.87-$13,303.13-$180,000.00--$59,754.03-$120,245.971 $32,000-$16,834.44--$15,165.56-$148,000.00-$42,919.59-$105,080.419 $32,000-$14,711.26--$17,288.74-$116,000.00-$28,208.33-$--87,791.671 $32,000--$12,290.83-$19,709.17-$--84,000.00---$15,917.50-$-68,082.507 $32,000--$ 9,531.55-$22,468.45-$-52,000.00--$-6,385.95-$45,614.051 $32,000--$6,385.95----$25,614.05-$-20,000.00---$-...-.-. -0.00-$--20,000.009Required: 1. Calculate the selling price implied by the lease and prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this sales-type lease. 2. Next Level State why this is a sales-type lease. 3. Prepare journal entries for Lamplighter for the years 2016, 2017, and 2019. 4. Prepare partial balance sheets for Lamplighter for December 31, 2016, and December 31, 2017, showing how the accounts should be disclosed.Chart of Accounts CHART OF ACCOUNTS Lamplighter Company General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 431 Interest Revenue: Leases 122 Lease Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Cost of Asset Leased 181 Equipment 511 Insurance Expense 189 Accumulated Depreciation 512 Utilities Expense 521 Salaries Expense LIABILITIES 532 Bad Debt Expense 211 Accounts Payable 540 Interest Expense 231 Salaries Payable 541 Depreciation Expense 250 Unearned Interest 559 Miscellaneous Expenses 261 Income Taxes Payable 910 Income Tax Expense\fAnalysis Calculate the selling price implied by the lease. Additional Instruction Round your computations and final answer to the nearest cent. $148,443.65 K Points: 1/1Feedback Check My Work For a sales-type lease, the selling price is equal to the present value of the lease payments. Prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this sales-type lease. Additional Instructions ype lease. Additional Instructions If an amount is zero, enter "0". Y ue Round your answers to the nearest cent. Enter all amounts as positive numbers.LAMPLIGHTER COMPANY Score: 117/117 Lease Payments Received and Interest Revenue Eared Summary 2016 - 2023 Interest Revenue Lease Payment Reduction of Net Unearned Date at 14% on Net Lease Receivable Net Investment Received Investment Interest: Leases Investment 2 January 1, 2016 $276.000.00 $120.545.17 $155.454.83 December 31, 2016 $32.000.00 $21.763.68 $10.236.32 244.000.00 98.781.49 145.218.51 December 31. 2017 32,000.00 20.330.59 11.669.41 212.000.00 78.450.90 133.549.10 5 December 31. 2018 32.000.00 18.696.87 13.303.13 180.000.00 59.754.03 120.245.97 December 31, 2019 32,000.00 16.834.44 15.165.56 148.000.00 42.919.59 105.060.41 7 December 31. 2020 32,000.00 14,711.26 17.288.74 116,000.00 28.208.33 87.791.67 December 31. 2021 32,000.00 12.290.83 19.709.17 84,000.00 15.917.50 68.082.50 December 31. 2022 52,000.00 9.531.55 22.468.45 52,000.00 6.385.95 45.614.05 10 December 31. 2023 32.000.00 6.385.95 25.614.05 20,000.00 0.00 20.000.00 Points: 51 / 51Next Level State why this is a sales-type lease. This is a sales-type lease for Lamplighter Company because: | There is a dealer profit. Il This lease meets all of the Group I (capitalization) criteria. Ill This lease meets at least one of the Group II (recognition) criteria for classification of a sales-type lease. I only. K Points: 1/1General Journal Prepare journal entries for Lamplighter for the years 2016, 2017, and 2019. Additional Instructions 1d 2019. Additional Instructions Record your entries on the page that matches the year. For ex. December 31 2016 should be recorded on page 2016. Scare: 219/219 Round your answers to the nearest cent. CREDIT Equipment held for lease is classified as Inventory on the company's books. 32.000.00