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6. RhoneMetro Industries manufactures equipment that is sold or leased. On December 31, 2018, RhoneMetro leased equipment to Western Soya Co. for a noncancelable stated

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RhoneMetro Industries manufactures equipment that is sold or leased. On December 31, 2018, RhoneMetro leased equipment to Western Soya Co. for a noncancelable stated lease term of four years ending December 31, 2022, at which time possession of the leased asset will revert back to RhoneMetro. The equipment cost $320,000 to manufacture and has an expected useful life of six years. Its normal sales price is $409,007. The expected residual value of $20,000 at December 31, 2022, is not guaranteed. Western Soya Co. is reasonably certain to exercise a purchase option on December 30, 2021, at an option price of $8,000. Equal payments under the lease are $151,000 (including $5,000 annual 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 11%. Western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation. 0 5 Hint A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (i.e., a BPO) (( 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.) 0 Required 3 Required 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Required 1 Required 2 Lessee Lessee Lessee Lessor Lessor Lessor Lessor 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 Dec.31 Payments Interest Balance Balance 2018 2018 2019 2020 2021

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