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Dr . Frankenstein Inc. ( the lessor ) constructs laboratory equipment with an estimated life of 1 2 years and leases it to Dr .
Dr Frankenstein Inc. the lessor constructs laboratory equipment with an estimated life of years and leases it to Dr Jekyll Inc. the lessee for a period of years beginning on January st The normal selling price of this equipment is $ and its value at the end of the lease term is estimated to be $ Jekyll agrees to make annual payments at the beginning of each year for the equipment. Jekyll also agrees to directly pay $ in annual insurance costs paid at the end of each year and guarantees that the equipment will be worth at least $ at the end of the lease. Frankenstein incurred costs of $ to construct the equipment and $ in negotiating and closing the lease. Frankenstein sets the annual payments based on the fair market value of the equipment and requires a return on the lease. Frankenstein has determined that collectability of the lease payments is reasonably assured and that no additional costs will be incurred. Both companies have December st fiscal year ends and depreciate their assets using the straightline method. Dr Jekyll has an borrowing rate, although it knows the implicit rate Frankenstein uses. The laboratory equipment has a fair market value of $ at the end of the lease this is unknown at the inception of the lease The equipments salvage value is $ This lease is noncancellable. Compute the annual payments Frankenstein requires for the lease. Check the criteria to determine if this lease is salesfinance or operating. Round all numbers to the nearest dollar. Prepare the year lease amortization schedule for the lessee Jekyll for both the lease liability and the rightofuse asset. Round all numbers to the nearest dollar. Prepare the year lease amortization schedule for the lessor Frankenstein for the lease receivable. Round all numbers to the nearest dollar. Prepare all the lessee journal entries through Hint: include journal entries for amortization expense and any costs the lessee expenses related to the lease. Prepare all the lessor journal entries through Hint: include journal entries for any costs the lessor expenses related to the lease. Prepare the lessee and lessor journal entries for the date when the lease ends.
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