Bidwell Leasing purchased a single-engine plane for its fair value of $695,470 and leased it to Red Baron Flying Club on January 1, 2018.(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.) Terms of the lease agreement and related facts were:
- Eight annual payments of $125,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 through 2024. Bidwell Leasings implicit interest rate was 12%. The estimated useful life of the plane is eight years. Payments were calculated as follows:
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| Amount to be recovered (fair value) | $ | 695,470 | |
| Lease payments at the beginning of each of the next eight years: ($695,470 5.56376*) | $ | 125,000 | |
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*Present value of an annuity due of $1: n = 8, i = 12%.
- Red Baron's incremental borrowing rate is 13%.
- Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $18,555.
REQUIRED:
6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest dollar amount.)
7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2024 (the final lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest dollar amount.)
Requirement 6 Pictures:
Requirement 7 Pictures:
Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (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.) General Journal Debit Credit No 1 Date December 31, 201 Interest expense Lease payable Cash 2 2 December 31, 201 Amortization expense Right-of-use asset December 31, 201 Cash Lease receivable Interest revenue Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (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 Journal entry worksheet Record the lease payment for Red Baron Flying Club. Note: Enter debits before credits. Debit Credit Date General Journal December 31, 2018 Interest expense Lease payable Cash Record entry Clear entry View general journal Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (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 Journal entry worksheet Record the amortization expense for Red Baron Flying Club. Note: Enter debits before credits. Debit Credit Date General Journal December 31, 2018 Amortization expense Right-of-use asset Record entry Clear entry View general journal Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (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 Journal entry worksheet Record the lease payment for Bidwell Leasing. Note: Enter debits before credits. Debit Credit Date General Journal December 31, 2018 Cash Lease receivable Interest revenue Record entry Clear entry View general journal Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2024 (the final lease payment). Both companies use straight-line depreciation. (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 Journal entry worksheet Record the lease payment for Red Baron Flying Club. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2024 Record entry Clear entry View general journal Record the amortization expense for Red Baron Flying Club. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2024 Record entry Clear entry View general journal Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2024 (the final lease payment). Both companies use straight-line depreciation. (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 Journal entry worksheet Record the lease payment for Bidwell Leasing. Note: Enter debits before credits. General Journal Debit Credit Date December 31, 2024 Record entry Clear entry View general journal
