4.
Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2018, Rhone-Metro 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 $280,000 to manufacture and has an expected useful life of six years. Its normal sales price is $320,273. The expected residual value of $16,000 at December 31, 2022, is not guaranteed. Equal payments under the lease are $89,000 (including $4,000 maintenance costs) 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 10%. Western Soya knows the interest rate implicit in the lease payments is T% Both companies use straight-line depreciation. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Show how Rhone-Metro calculated the $89,000 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) Unguaranteed Residual Value PV of $1 Table or calculator function: 7% Present Value Amount to be recovered 320,273 ess: Present value of the unguaranteed residual value Amount to be recovered through periodic lease payments Lease Payments PVAD of $1 Table or calculator function: 7% Lease Payments Lease payments at the beginning of each of four years 85,000 Add: Maintenance costs 4,000 89,000 Lease payments including executory costs How should this lease be ci Required 3 Lessee h Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? Western Soya Co. Rhone-Metro Industries Sales-type lease Finance lease 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. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet Date General Journal No Debit Credit DecemberRight-of-use a 2018 Right-of-use asset Lease payable DecembeLease payable 2018 85,000 Prepaid maintenance expense 4,000 Cash 89,000 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. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet Date Debit No General Journal Credit December 31 2018 320,273 Lease receivable Cost of goods sold Sales revenue Equipment 280,000 December 31. Cash 89,000 2018 Maintenance fee payable 4,000 Lease receivable 85,000 Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Show Favorites Amortization Schedule Effective Decrease in Outstanding Dec.31 Payments Interest Balance Balance 85,000 2018 85,000 2019 85,000 85,000 2020 2021 85,000 340,000 85,000 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.) Lease Amortization Schedule Effective Decrease in Outstanding 31 Pa Interest Balance Balance 2018 320,273 2018 85,000 85,000 2019 85,000 2020 85,000 2021 85,000 Required 3 Lessor 2022 340,000 85,000 Prepare the appropriate entries for Western Soya on December 31, 2019 (the second lease payment and amortization). (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet Date General Journal Debit Credit 2019 Amortization e expense Right-of-use asset December 31 4,000 2019 Maintenance e expense Prepaid maintenance expense 4,000 December 3,Interest expense 2019 Lease payable Prepaid maintenance expense 4,000 Cash 89,000 Prepare the appropriate entries for Rhone-Metro on December 31, 2019 (the second lease payment and amortization). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet Date No General Journal Debit Credit December 31.cash 89,000 2019 Maintenance fee payable 4,000 Lease receivable Interest revenue Prepare the appropriate entries Western Soya on December 31, 2022, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View journal entry worksheet View transaction list Debit Credit General Journal Date No December 31.Maintenance expense 2022 4,000 4,000 Prepaid maintenance expense December 31, Amortization expense 2022 Right-of-use asset 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 $1,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list View journal entry worksheet Date General Journal No Debit Credit DecembeEquipment 2022 Loss on leased assets Lease receivable Interest revenue
