Chapter 21 Homework Question 11 of 11 View Policies Show Attempt History 1.89/10 Question 11 of 11 1.89/10 Your awer is partially correct Question 11 of 11 1.89/10 Discuss the nature of this lease for both the lessee and the lessor. This is a type for Teal. This is a c eTextbook and Media for Sandhill. Prepare the journal entries Teal 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 0 for the amounts. Round answers to O decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Your answer is partially conect Prepare the journal entries Sandhill 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 0 for the amounts. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.) Current Attempt in Progress Sandhill Leasing Company agrees to lease equipment to Teal Corporation on January 1, 2020. The following information relates t 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 $485,000, and the fair value of the asset on January 1, 2020, is $687,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $60,000. Teal estimates that the expected residual value at the end of the lease term will be 60,000. Teal amortizes all of its leased equipment on a straight- line basis. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. Sandhill desires a 10% rate of return on its investments. Teal's incremental borrowing rate is 11%, and the lessor's implicit rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. Your answer is incorrect. Discuss the nature of this lease for both the lessee and the lessor. List of Accounts Your answer is incorrect Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Annual rental payment eTextbook and Media List of Accounts Your answer is incorrect Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.) Present value of minimum lease payments eTextbook and Media List of Accounts This is a sales type for Teal. Date Account Titles and Explanation 1/3/20 12/31/20 Debit (To record the lease) 118032 (To record lease pay) Depreciation Expe 83306 Accumulated Depreciation Capital Lames (To recondition) (To recondit) 1/1/21 12/31/21 Depreciation Expe 60596 57436 (To record amortization) 54279 (To record intern eTextbook and Media List of Accounts 12/01/20 Account Titles and Explanation eTextbook and Media List of Accounts Debit 447000 SA Suppose Teal expects the residual value at the end of the lease term to be $50,000 but still guarantees a residual of $60,000. Compute the value of the lease liability at lease commencement. eTextbook and Media List of Accounts