E20-8 LO 20.6 A Lessor Accounting with Unguaranteed Residual Value Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. 2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs directly to a third party 4. The interest rate implicit in the lease is 14% 5. The initial direct costs are insignificant and assumed to be zero. 6. It is probable that Edom will collect the lease payments. Required: 1. Next Level Assuming that the lease is a sales type kase from Edom's point of view, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income camed by Edom. 3. Prepare a table showing the accretion of the unguaranteed residual asset 4. Prepare journal entries for Edom, the lessor, for the years 2019 and 2020 ~ ~ A Wrap Text Merge & Center X fix 122 A B C D E F G H 1 E20-6 1. Enter the appropriate amounts in the green shaded cells. An asterisk (*) will appear before incorrect amounts entered in the answer cells Selling price fair value) Cost of the asset Less: PV of the unguaranteed residual value Cost of goods sold 13 2. Complete the schedule below by entering the appropriate amounts in the green-shaded cells 14 An asterisk will appear before incorrect amounts entered in the answer cells. Summary of Lease Payments Received and Interest Income Lamed by Edom Company Interest Annual Lease Income at 14% Payments $ 100,000.00 Jan. 1. 2019 Jan. 1. 2019 Dec 31, 2019 Jan 1.2020 Dec 31, 2020 Jan 1.2021 Dec 31, 2021 Jan. 1.2022 Dec 31, 2022 Jan 1, 2023 100,000.00 100,000.00 3. Complete the schedule below by entering the appropriate amounts in the green shaded cells An asterisk will appear before incorrect amounts entered in the answer cells Accretion Schedule for Unguaranteed Residual Asset Date Jan 1, 2019 Dec 31, 2019 Dec 31, 2020 Dec. 31. 2021 Dec 31, 2022 Dec 31, 2023 Complete the journal aries by entering the appropriate accounts and amount in the green-shaded calls. An asterisk will appear before incorrect amounts entered in the answer calle Accounties will not be graded 2019 E20-8 Ready esc Home Insert Draw Page Layout Formulas Dald Review New 2 Wrap Text AA === A Merge & Center Paste 122 A x BTU H V fx. C D B H I J K E F G Accretion Schedule for Unguaranteed Residual Accretion/ Unguaranteed Interest Residual Asset Balance Jan. 1. 2019 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Complete the journal entries by entering the appropriate accounties and amounts in the green shaded cells. An asterisk) will appear before incorrect amounts entered in the answer cells Account titles will not be graded. Jan. 1 Lease Receivable Sales Revenue Unguaranteed Residual Asset Dec. 31 Lease Receivable 31 Unguaranteed Residual Asset Dec 31 Uneamed Interest: Less 31 Unguaranteed Residual Asset E20-8 Ready E20-8 LO 20.6 A Lessor Accounting with Unguaranteed Residual Value Edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,000 to be made in advance at the beginning of each year. 2. The equipment costs $313,000. The equipment has an estimated life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs directly to a third party 4. The interest rate implicit in the lease is 14% 5. The initial direct costs are insignificant and assumed to be zero. 6. It is probable that Edom will collect the lease payments. Required: 1. Next Level Assuming that the lease is a sales type kase from Edom's point of view, calculate the selling price. 2. Prepare a table summarizing the lease receipts and interest income camed by Edom. 3. Prepare a table showing the accretion of the unguaranteed residual asset 4. Prepare journal entries for Edom, the lessor, for the years 2019 and 2020 ~ ~ A Wrap Text Merge & Center X fix 122 A B C D E F G H 1 E20-6 1. Enter the appropriate amounts in the green shaded cells. An asterisk (*) will appear before incorrect amounts entered in the answer cells Selling price fair value) Cost of the asset Less: PV of the unguaranteed residual value Cost of goods sold 13 2. Complete the schedule below by entering the appropriate amounts in the green-shaded cells 14 An asterisk will appear before incorrect amounts entered in the answer cells. Summary of Lease Payments Received and Interest Income Lamed by Edom Company Interest Annual Lease Income at 14% Payments $ 100,000.00 Jan. 1. 2019 Jan. 1. 2019 Dec 31, 2019 Jan 1.2020 Dec 31, 2020 Jan 1.2021 Dec 31, 2021 Jan. 1.2022 Dec 31, 2022 Jan 1, 2023 100,000.00 100,000.00 3. Complete the schedule below by entering the appropriate amounts in the green shaded cells An asterisk will appear before incorrect amounts entered in the answer cells Accretion Schedule for Unguaranteed Residual Asset Date Jan 1, 2019 Dec 31, 2019 Dec 31, 2020 Dec. 31. 2021 Dec 31, 2022 Dec 31, 2023 Complete the journal aries by entering the appropriate accounts and amount in the green-shaded calls. An asterisk will appear before incorrect amounts entered in the answer calle Accounties will not be graded 2019 E20-8 Ready esc Home Insert Draw Page Layout Formulas Dald Review New 2 Wrap Text AA === A Merge & Center Paste 122 A x BTU H V fx. C D B H I J K E F G Accretion Schedule for Unguaranteed Residual Accretion/ Unguaranteed Interest Residual Asset Balance Jan. 1. 2019 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Complete the journal entries by entering the appropriate accounties and amounts in the green shaded cells. An asterisk) will appear before incorrect amounts entered in the answer cells Account titles will not be graded. Jan. 1 Lease Receivable Sales Revenue Unguaranteed Residual Asset Dec. 31 Lease Receivable 31 Unguaranteed Residual Asset Dec 31 Uneamed Interest: Less 31 Unguaranteed Residual Asset E20-8 Ready
