Current Attempt in Progress

Skysong Corporation leases a building to Sheridan, Inc. on January 1, 2020. The following facts pertain to the lease agreement.

1.		The lease term is 10 years with equal annual rental payments of $3,503 at the end of each year.
2.		Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature.
3.		The building has a fair value of $34,600, a book value to Skysong of $22,300, and a useful life of 15 years.
4.		At the end of the lease term, Skysong and Sheridan expect the residual value of the building to be $12,300, and this amount is guaranteed by Money, Inc., a third party.
5.		Skysong wants to earn a 5% return on the lease, and collectibility of the payments is probable.

Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Determine the nature of this lease to both Skysong and Sheridan.

The lease is a/an financing leaseoperating lease to Skysong.

The lease is a/an financing leaseoperating lease to Sheridan.

eTextbook and Media

List of Accounts

Assume the present value of lease payments and third-party guarantee is $34,600 and the rate of return to amortize the net lease receivable to zero is 13.31%. Prepare the amortization schedules Skysong would use to amortize the net lease receivable to zero. (Round answers to 0 decimal places, e.g. 5,275.)

SKYSONG CORPORATION (Lessor) Lease Amortization Schedule Sales-Type Lease
Date		Annual Lease Payment		Interest on Lease Receivable		Recovery of Lease Receivable		Lease Receivable
1/1/20		$		$		$		$
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
12/31/26
12/31/27
12/31/28
12/31/29				*
12/31/30
		$		$		$

*Rounded $3

SKYSONG CORPORATION (Lessor) Lease Amortization Schedule Direct Financing Lease
Date		Annual Lease Payment		Interest on Lease Receivable		Recovery of Lease Receivable		Lease Receivable
1/1/20		$		$		$		$
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
12/31/26
12/31/27
12/31/28
12/31/29				*
12/31/29
		$		$		$

*Rounded $3

eTextbook and Media

List of Accounts

Prepare the journal entries to record the entries for Skysong for 2020 and 2021. (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.)

Prepare the journal entries for Sheridan (the lessee) for 2020 and 2021, assuming the rate implicit in the lease is known to Sheridan. (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.)