Question
Branif Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Branif a 10% rate of return for providing long-term financing. A lease
Branif Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Branif a 10% rate of return for providing long-term financing. A lease agreement with Branson Construction specified 20 annual payments beginning December 31, 2018, the beginning of the lease. The estimated useful life of the leased equipment is 20 years with no residual value. Its cost to Branif was $1,311,089. The lease qualifies as a finance lease to Branson. Maintenance of the equipment was contracted for through a 20-year service agreement with Midway Service Company requiring 20 annual payments of $3,000 beginning December 31, 2018. Progressive insurance Company charges Branif $3,000 annually for hazard insurance coverage on the equipment. Both companies use straight-line depreciation or amortization. (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.) Required: Prepare the appropriate entries for both the lessee and lessor to record the second lease payment and depreciation on December 31, 2019, under each of three independent assumptions: 1. The lessee pays maintenance costs as incurred. The lessor pays insurance premiums as incurred. The lease agreement requires annual payments of $140,000. 2. The contract specifies that the lessor pays maintenance costs as incurred. The lessees lease payments were increased to $143,000 to include an amount sufficient to reimburse these costs. 3. The lessees lease payments of $143,000 included $3,000 for hazard insurance on the equipment rather than maintenance.
Required 3 Lessee Required 3 Lessor Required 1 Lessee Required 1 Lessor Required 2Required 2 Lessee Lessor The lessee pays maintenance costs as incurred. The lessor pays insurance premiums as incurred. The lease agreement requires annual payments of $140,000. (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.) Credit No Event General Journal Debit 117,109 22,891 Interest expense Lease payable 40,000 Cash 3,000 2 2 Maintenance expense 3,000 Cash 3 Depreciation expense 65,554 65,554 Accumulated depreciation Required 1 Lessee Required 1 Lessor> Complete this question by entering your answers in the tabs below. Required 1Required Lessee 1 Required Lessee Required 2 Lessor Required 3 Lessee Required 3 Lessor Lessor The contract specifies that the lessor pays maintenance costs as incurred. The lessee's lease payments were increased to $143,000 to include an amount sufficient to reimburse these costs. (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.) Event General Journal Debit No Credit 117,109 Interest expense 22,891 Lease payable 3,000 Maintenance expense Cash 143,000 65,554 2 2 Depreciation expense Accumulated depreciation 65,554 K Required 1 Lessor Required 2 Lessor Complete this question by entering your answers in the tabs below. Required 2 Required 3Required 3 Lessee Required 1 Lessee Required 1Required Lessor Lessee Lessor Lessor The lessee's lease payments of $143,000 included $3,000 for hazard insurance on the equipment rather than maintenance. (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.) Event General Journal Debit No Credit 117,109 Interest expense 22,891 Lease payable 3,300 Cash 143,300 2 2 Amortization expense 65,554 Accumulated depreciation 65,554 K Required 2 Lessor Required 3 Lessor Complete this question by entering your answers in the tabs below. Required 2Required 3Required 3 Lessee Required 1 Lessee Required 1Required Lessor Lessee Lessor Lessor The lessee's lease payments of $143,000 included $3,000 for hazard insurance on the equipment rather than maintenance. (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.) Event General Journal Debit No Credit Cash 140,000 22,891 Lease receivable Maintenance fee payable 3,000 300 Sales revenue Interest revenue K Required 3 Lessee Required 3 Lessor Required 3 Lessee Required 3 Lessor Required 1 Lessee Required 1 Lessor Required 2Required 2 Lessee Lessor The lessee pays maintenance costs as incurred. The lessor pays insurance premiums as incurred. The lease agreement requires annual payments of $140,000. (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.) Credit No Event General Journal Debit 117,109 22,891 Interest expense Lease payable 40,000 Cash 3,000 2 2 Maintenance expense 3,000 Cash 3 Depreciation expense 65,554 65,554 Accumulated depreciation Required 1 Lessee Required 1 Lessor> Complete this question by entering your answers in the tabs below. Required 1Required Lessee 1 Required Lessee Required 2 Lessor Required 3 Lessee Required 3 Lessor Lessor The contract specifies that the lessor pays maintenance costs as incurred. The lessee's lease payments were increased to $143,000 to include an amount sufficient to reimburse these costs. (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.) Event General Journal Debit No Credit 117,109 Interest expense 22,891 Lease payable 3,000 Maintenance expense Cash 143,000 65,554 2 2 Depreciation expense Accumulated depreciation 65,554 K Required 1 Lessor Required 2 Lessor Complete this question by entering your answers in the tabs below. Required 2 Required 3Required 3 Lessee Required 1 Lessee Required 1Required Lessor Lessee Lessor Lessor The lessee's lease payments of $143,000 included $3,000 for hazard insurance on the equipment rather than maintenance. (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.) Event General Journal Debit No Credit 117,109 Interest expense 22,891 Lease payable 3,300 Cash 143,300 2 2 Amortization expense 65,554 Accumulated depreciation 65,554 K Required 2 Lessor Required 3 Lessor Complete this question by entering your answers in the tabs below. Required 2Required 3Required 3 Lessee Required 1 Lessee Required 1Required Lessor Lessee Lessor Lessor The lessee's lease payments of $143,000 included $3,000 for hazard insurance on the equipment rather than maintenance. (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.) Event General Journal Debit No Credit Cash 140,000 22,891 Lease receivable Maintenance fee payable 3,000 300 Sales revenue Interest revenue K Required 3 Lessee Required 3 LessorStep by Step Solution
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