Exercise 115

Hayes Corp. is a manufacturer of truck trailers. On January 1, 2014, Hayes Corp. leases 11 trailers to Lester Company under a 5-year noncancelable lease agreement. The following information about the lease and the trailers is provided:

1.	Equal annual payments that are due on January 1 each year provide Hayes Corp. with an 8% return on net investment (present value factor for 5 periods at 8% is 4.31213).
2.	Titles to the trailers pass to Lester at the end of the lease.
3.	The fair value of each trailer is $51,100. The cost of each trailer to Hayes Corp. is $47,200. Each trailer has an expected useful life of nine years.
4.	Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Hayes Corp.

Exercise 115 Hayes Corp. is a manufacturer of truck trailers. On January 1, 2014, Hayes Corp. leases 11 trailers to Lester Company under a 5-year noncancelable lease agreement. The following information about the lease and the trailers is provided: 1. 2. 3. 4. Equal annual payments that are due on January 1 each year provide Hayes Corp. with an 8% return on net investment (present value factor for 5 periods at 8% is 4.31213). Titles to the trailers pass to Lester at the end of the lease. The fair value of each trailer is $51,100. The cost of each trailer to Hayes Corp. is $47,200. Each trailer has an expected useful life of nine years. Collectibility of the lease payments is reasonably predictable and there are no important uncertainties surrounding the amount of costs yet to be incurred by Hayes Corp. What type of lease is this for the lessor? Calculate the annual lease payment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) $ Annual lease payment Prepare a lease amortization schedule for Hayes Corp. for the first three years. (Round answers to 0 decimal places e.g. 5,275.) Date Hayes Corp. Lease Amortization Schedule (Lessor) Lease Interest on Lease Annual Lease Receivable Receivable Rental Recovery Lease Receivable $ 1/1/14 1/1/14 $ $ $ 1/1/15 1/1/16 Prepare the journal entries for the lessor for 2014 to record the lease agreement, the receipt of the lease rentals, and the recognition of revenue. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Jan. 1, 2014 Account Titles and Explanation Debit Credit (To record the lease.) Jan. 1, 2014 (To record receipt of the first lease payments.) Dec. 31, 2014 (To record interest earned during the first year of the lease.) Click if you would like to Show Work for this question: Open Show Work