(c)
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Prepare all the necessary journal entries for Sunland for 2020. (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. Record journal entries in the order presented in the problem.)
Exercise 21-12 (Part Level Submission)
On January 1, 2020, Sunland Company leased equipment to Flynn Corporation. The following information pertains to this lease.
| 1. | | The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $5,000. |
| 2. | | Equal rental payments are due on January 1 of each year, beginning in 2020. |
| 3. | | The fair value of the equipment on January 1, 2020, is $120,000, and its cost is $110,000. |
| 4. | | The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. |
| 5. | | Sunland set the annual rental to ensure a 6% rate of return. Flynns incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. |
| 6. | | Collectibility of lease payments by the lessor is probable. |
Both the lessor and the lessees accounting periods end on December 31.
Prepare all the necessary journal entries for Sunland for 2020. (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. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit x 1/1/20 Lease Receivable 120000 x Cost of Goods Sold 106475 Sales Revenue 116475 Inventory 110000 (To record the lease) 1/1/20 A Cash Lease Receivable (To record lease payment) ||| 12/31/20 Interest Revenue 6019 Click if you would like to Show Work for this question: Open Show Work (a) Your answer is correct. Discuss the nature of this lease to Sunland and Flynn. The nature of this lease for Sunland is a sales-type 4 lease. The nature of this lease for Flynn is a finance lease. Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT LINK TO VIDEO Attempts: 2 of 5 used (b) Your answer is correct. Calculate the amount of the annual rental payment. (Round answer to 0 decimal places, e.g. 5,275.) Annual rental payment 22752 Present Value of an Annuity Due of 1 10% 11% 8% 9% 12% 15% (n) Periods 1 1.00000 1.92593 2.78326 3.57710 4.31213 1.00000 1.91743 2.75911 3.53130 4.23972 1.00000 1.90909 2.73554 3.48685 4.16986 1.00000 1.90090 2.71252 3.44371 4.10245 1.00000 1.89286 2.69005 3.40183 4.03735 1.00000 1.86957 2.62571 3.28323 3.85498 2 3 4 5 6 4.99271 5.62288 6.20637 6.74664 7.24689 4.88965 5.48592 6.03295 6.53482 6.99525 4.79079 5.35526 5.86842 6.33493 6.75902 4.69590 5.23054 5.71220 6.14612 6.53705 4.60478 5.11141 5.56376 5.96764 6.32825 4.35216 4.78448 5.16042 5.48732 5.77158 7 8 9 10 Present Value of an Annuity Due of 1 1 1- (1+0)7-1 Pn,i = 1+ i (n) Periods 2% 4% 5% 6% 1 2 3 4 5 1.00000 1.98039 2.94156 3.88388 4.80773 PVF-AD, 2A2% 3% 1.00000 1.00000 1.97561 1.97087 2.92742 2.91347 3.85602 3.82861 4.76197 4.71710 1.00000 1.96154 2.88609 3.77509 4.62990 1.00000 1.95238 2.85941 3.72325 4.54595 1.00000 1.94340 2.83339 3.67301 4.46511 7 8 9 10 5.71346 6.60143 7.47199 8.32548 9.16224 5.64583 6.50813 7.34939 8.17014 8.97087 5.57971 6.41719 7.23028 8.01969 8.78611 5.45182 6.24214 7.00205 7.73274 8.43533 5.32948 6.07569 6.78637 7.46321 8.10782 5.21236 5.91732 6.58238 7.20979 7.80169 Present Value of an Ordinary Annuity of 1 10% 11% 12% 8% 9% 15% (n) Periods .92593 1.78326 2.57710 3.31213 3.99271 91743 1.75911 2.53130 3.23972 3.88965 .90909 1.73554 2.48685 3.16986 3.79079 90090 1.71252 2.44371 3.10245 3.69590 .89286 1.69005 2.40183 3.03735 3.60478 .86957 1.62571 2.28323 2.85498 3.35216 1 2 3 4 5 4.62288 5.20637 5.74664 6.24689 6.71008 4.48592 5.03295 5.53482 5.99525 6.41766 4.35526 4.86842 5.33493 5.75902 6.14457 4.23054 4.71220 5.14612 5.53705 5.88923 4.11141 4.56376 4.96764 5.32825 5.65022 3.78448 4.16042 4.48732 4.77158 5.01877 6 7 8 9 10 Present Value of an Ordinary Annuity of 1 1 1- (1+1) PVF-OAni = i (n) Periods 2% 2A%% 3% 4% 5% 6% 1 2 3 4 .98039 1.94156 2.88388 3.80773 4.71346 .97561 1.92742 2.85602 3.76197 4.64583 .97087 1.91347 2.82861 3.71710 4.57971 .96154 1.88609 2.77509 3.62990 4.45182 .95238 1.85941 2.72325 3.54595 4.32948 .94340 1.83339 2.67301 3.46511 4.21236 5 5.60143 6.47199 7.32548 8.16224 8.98259 5.50813 6.34939 7.17014 7.97087 8.75206 5.41719 6.23028 7.01969 7.78611 8.53020 5.24214 6.00205 6.73274 7.43533 8.11090 5.07569 5.78637 6.46321 7.10782 7.72173 4.91732 5.58238 6.20979 6.80169 7.36009 9 10 8% 9% 15% (n) Periods 1.00000 2.08000 3.24640 4.50611 5.86660 1.00000 2.09000 3.27810 4.57313 5.98471 Future Value of an Ordinary Annuity of 1 10% 11% 12% 1.00000 1.00000 1.00000 2.10000 2.11000 2.12000 3.31000 3.34210 3.37440 4.64100 4.70973 4.77933 6.10510 6.22780 6.35285 1.00000 2.15000 3.47250 4.99338 6.74238 2 3 4 5 6 7.33592 8.92280 10.63663 12.48756 14.48656 7.52334 9.20044 11.02847 13.02104 15.19293 7.71561 9.48717 11.43589 13.57948 15.93743 7.91286 9.78327 11.85943 14.16397 16.72201 8.11519 10.08901 12.29969 14.77566 17.54874 8.75374 11.06680 13.72682 16.78584 20.30372 7 8 9 10 Future Value of an Ordinary Annuity of 1 (1+1)"-1 FVF-OA;= i 2% 212% 3% 4% 5% (n) Periods 6% 2 1.00000 2.02000 3.06040 4.12161 5.20404 1.00000 2.02500 3.07563 4.15252 5.25633 1.00000 2.03000 3.09090 4.18363 5.30914 1.00000 2.04000 3.12160 4.24646 5.41632 1.00000 2.05000 3.15250 4.31013 5.52563 1.00000 2.06000 3.18360 4.37462 5.63709 4 5 6 7 oc 6.30812 7.43428 8.58297 9.75463 10.94972 6.38774 7.54743 8.73612 9.95452 11.20338 6.46841 7.66246 8.89234 10.15911 11.46338 6.63298 7.89829 9.21423 10.58280 12.00611 6.80191 8.14201 9.54911 11.02656 12.57789 6.97532 8.39384 9.89747 11.49132 13.18079 10 8% (n) Periods .92593 .85734 .79383 .73503 .68058 Present Value of 1,(Present Value of a Single Sum) 9% 10% 11% 12% 15% .91743 .90909 .90090 .89286 .86957 .84168 .82645 .81162 .79719 .75614 .77218 .75132 .73119 .71178 .65752 .70843 .68301 .65873 .63552 .57175 .64993 .62092 .59345 .56743 49718 2 3 4 5 .63017 .58349 .54027 .50025 46319 .59627 .54703 .50187 .46043 .42241 .56447 .51316 .46651 42410 .38554 .53464 48166 43393 .39092 .35218 .50663 .45235 .40388 .36061 .32197 43233 .37594 32690 .28426 .24719 6 7 8 9 10 = Present Value of 1 (Present Value of a Single Sum) 1 PVFni = (1 + )" (1+i)" (n) Periods 2% 2A%% 3% 4% 5% 6% 1 .98039 .97561 .97087 .96154 .95238 .94340 2 .96117 .95181 .94260 .92456 .90703 .89000 3 .94232 .92860 .91514 .88900 .86384 .83962 4 .92385 .90595 .88849 .85480 .82270 .79209 5 .90573 .88385 .86261 .82193 .78353 .74726 6 7 .88797 .87056 .85349 .86230 .84127 .82075 .83748 .81309 .78941 .79031 .75992 .73069 70950 .74622 .71068 .67684 .70496 .66506 .62741 O7 on 70 70040 CA1 50nn Future Value of 1 (Future Value of a Single Sum) 8% 9% 10% 11% 12% 15% (n) Periods 1.08000 1.16640 1.25971 1.36049 1.46933 1.09000 1.18810 1.29503 1.41158 1.53862 1.10000 1.21000 1.33100 1.46410 1.61051 1.11000 1.23210 1.36763 1.51807 1.68506 1.12000 1.25440 1.40493 1.57352 1.76234 1.15000 1.32250 1.52088 1.74901 2.01136 1 2 3 4 5 1.58687 1.71382 1.85093 1.99900 2.15892 1.67710 1.82804 1.99256 2.17189 2.36736 1.77156 1.94872 2.14359 2.35795 2.59374 1.87041 2.07616 2.30454 2.55803 2.83942 1.97382 2.21068 2.47596 2.77308 3.10585 2.31306 2.66002 3.05902 3.51788 4.04556 7 8 9 10 6% Future Value of 1 (Future Value of a Single Sum) FVFn,i = (1 + i)" (n) Periods 2% 2A%% 3% 4% 5% 1 1.02000 1.02500 1.03000 1.04000 1.05000 2 1.04040 1.05063 1.06090 1.08160 1.10250 3 1.06121 1.07689 1.09273 1.12486 1.15763 4 1.08243 1.10381 1.12551 1.16986 1.21551 5 1.10408 1.13141 1.15927 1.21665 1.27628 1.06000 1.12360 1.19102 1.26248 1.33823 7 8 1.12616 1.14869 1.17166 1.15969 1.18869 1.21840 1.19405 1.22987 1.26677 1.26532 1.31593 1.36857 1.34010 1.40710 1.47746 1.41852 1.50363 1.59385
