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Branif Leasing leases mechanical equipment to industrial consumers under sales-type leases that earn Branif a 11% 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 11% rate of return for providing long-term financing. A lease agreement with Branson Construction specified 20 annual payments beginning December 31 , 2024 , 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 $928,125. - 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 $6,000 beginning December 31, 2024. - Progressive insurance Company charges Branif \$6,000 annually for hazard insurance coverage on the equipment. - Both companies use straight-line depreciation or amortization. Note: Use tables, Excel, or a financial calculator. (FV of $1, P P of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1 ). Required: Prepare the appropriate entries for both the lessee and lessor to record the second lease payment and depreciation on December 31 , 2025, 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 $105,000. 2. The contract specifies that the lessor pays maintenance costs as incurred. The lessee's lease payments were increased to $111,000 to include an amount sufficient to reimburse these costs. 3. The lessee's lease payments of $111,000 included $6,000 for hazard insurance on the equipment rather than maintenance. The lessee's lease payments of $111,000 included $6,000 for hazard insurance on the equipment rather than maintenance. Note: 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. The lessee's lease payments of $111,000 included $6,000 for hazard insurance on the equipment rather than maintenanc Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round yo intermediate and final answers to nearest whole dollar
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