Exercise 21-10 (Part Level Submission)

The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Teal Mountain Company, a lessee.

Commencement date		May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020		$19,656.69
Bargain purchase option price at end of lease term		$7,000
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$65,000
Fair value of asset at May 1, 2020		$93,000
Lessors implicit rate		6	%
Lessees incremental borrowing rate		6	%

The collectibility of the lease payments by Sandhill is probable.

c. Prepare a lease amortization schedule for Rode for the 5-year lease term.

d. Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Rode's annual accounting period ends on December 31. Reversing entries are used by Rode.