Answered step by step
Verified Expert Solution
Question
1 Approved Answer
As you can see, I need help figuring out the last account. I know the formula to find it is [(636387-118834-( ?)* 0.10)] I just
As you can see, I need help figuring out the last account. I know the formula to find it is [(636387-118834-(?)*0.10)] I just don't know what the number would be in the question mark (?)
Flint Leasing Company agrees to lease equipment to Buffalo Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $569.000, and the fair value of the asset on January 1, 2020, is $682,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Buffalo estimates that the expected residual value at the end of the lease term will be 55,000. Buffalo amortizes all of its leased equipment on a straight-line basis. 4 The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. . 6. Flint desires a 9% rate of return on its investments. Buffalo's incremental borrowing rate is 10%, and the lessor's implicit rate is unknown (Assume the accounting period ends on December 31.) Click here to view factor tables. (a) Your answer is correct. Discuss the nature of this lease for both the lessee and the lessor. This is a finance lease V for Buffalo This is a sales-type lease for Flint. eTextbook and Media List of Accounts Attempts: 1 of 5 used (b) Your answer is correct. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 58,972.) Annual rental payment $ 118,834 e Textbook and Media List of Accounts Attempts: 1 of 5 used (c) Your answer is correct. Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answer to decimal places eg. 58,972.) Present value of minimum lease payments S 636,387 e Textbook and Media List of Accounts Attemnts- 2 of 5 used (d) Your answer is partially correct. Prepare the journal entries Buffalo would make in 2020 and 2021 related to the lease arrangement. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round answers to decimal places eg. 58,972. Record journal entries in the order presented in the problem.) late Account Titles and Explanation Debit Credit 0 Right-of-Use Asset 636,387 Lease Liability 636,387 (To record the lease.) Lease Liability 118.834 Cash 118.834 (To record lease payment.) 1/20 V Amortization Expense 90.912 Right-of-Use Asset 90,912 (To record amortization.) Interest Expense 51,755 Lease Llability 51.755 (To record interest.) > Lease Liability 118,834 Cash 118,834 1/21 Amortization Expense 90.912 Right-of-Use Asset 90.912 (To record amortization.) Interest Expense Lezse Llabilley (To record interest.) eTextbook and Media List of Accounts Save for Later Attempts: 1 of 5 used SubmitStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started