Accounts Payable Accumulated Depreciation-Building Accumulated Depreciation-Leased Building Accumulated Depreciation-Capital Leases Accumulated Depreciation-Equipment Accumulated Depreciation-Leased Equipment Accumulated Depreciation-Leased Machinery Accumulated Depreciation-Machinery Advertising Expense Amortization Expense Airplanes Buildings Cash Cost of Goods Sold Deferred Gross Profit Deposit Liability Depreciation Expense Equipment Executory Costs Executory Costs Payable Gain on Disposal of Equipment Gain on Disposal of Plant Assets Gain on Lease Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Leased Asset Leased Buildings Leased Equipment Lease Expense Leased Land Lease Liability Lease Receivable Lease Revenue Legal Expense Loss on Capital Lease Machinery Maintenance and Repairs Expense Notes Payable Prepaid Lease Executory Costs Prepaid Legal Fees Property Tax Expense Property Tax Payable Rent Expense Rent Payable Rent Receivable Rent Revenue Revenue from Sale-Leaseback Right-of-Use Asset Salaries and Wages Expense Sales Revenue Selling Expenses Trucks Unearned Profit on Sale-Leaseback Unearned Lease Revenue Unearned Service Revenue

Exercise 21A-19 a-d Sarasota Corporation leased equipment to Metlock, Inc. on January 1, 2017. The lease agreement called for annual rental payments of $1,256 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $9,100, a book value of $7,100, and Sarasota expects a residual value of $6,600 at the end of the lease term. Sarasota set the lease payments with the intent of earning a 6% return, though Metlock is unaware of the rate implicit in the lease and has an incremental borrowing rate of 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Determine the nature of the lease to both Sarasota and Metlock. The lease is a/an lease to Metlock. The lease is a/an lease to Sarasota. SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare all necessary journal entries for Metlock in 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 (To record the lease) 1/1/17 (To record lease liability) 12/31/17 How would the measurement of the lease liability and right-of-use asset be affected if, as a result of the lease contract, Metlock was also required to pay $500 in commissions, prepay $800 in addition to the first rental payment, and pay $200 of insurance each year? (Round answers to 0 decimal places, e.g. 5,275.) Lease liability $ Right-of-use-asset U SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Suppose, instead of a 3-year lease term, Metlock and Sarasota agree to a one-year lease with a payment of $1,256 at the start of the lease. Prepare necessary journal entry for Metlock in 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/17 Click if you would like to Show Work for this question: Open Show Work