Exercise 21-7 On January 1, 2017, Blossom Company leased equipment to Blue Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2. Equal rental payments are due on January 1 of each year, beginning in 2017 3. The fair value of the equipment on January 1, 2017, is $145,000, and its cost is $116,000 4. The equipment has an economic life of 8 years, with an unguaranteed residual value of $11,000. Blue depreciates all of its equipment on a straight-line basis. | 5, Blossom set the annual rental to ensure an 10% rate of return. Blue's incremental borrowing rate is 11%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by the lessor (Both the lessor and the lessee's accounting period ends on December 31.) Your answer is incorrect. Try again. Calculate the amount of the annual rental payment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971.) The amount of the annual rental payment 30266 SHoW LIST OF ACCOUNTS Your answer is partially correct. Try again. Prepare all the necessary journal entries for Blue for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971 Date Account Titles and Explanation Debit Credit 142126 1/1/17Lease Receivable 142126 Lease Liability (To record the lease.) 30266 Lease Liability 30266 Cash (To record lease payment.) 23688 Depreciation Expense Lease Uability 142126 (To rccond the lease.) 30266 Cash 30266 (To record lease payment.) Expense 23688 Accumulated Depreciation-Equipment 23688 (To record depreciation.) Interest Expense 12305 Interest Payable 12305 (To record interest) SHOW LIST OF ACCOUNTS TO TEXT Your answer is partially correct. Try again. Prepare all the necessary journal entries for Blossom for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to O decimal places e.g. 58,971 Date Accoent Titles and Explanation Debit Credit 1/1/17 Lease Receivable 145 Cost of Goods Sold 116000 Sales Revenue 145000 Inventory 116000 (To rocord the lease ) sh 30266 Lease Receivable 30266 To record lease payment ) 12/31/17 Interest Receivable 11473 Interest Revenue 11473 To record interest)
