Exercise 21-9

The following facts pertain to a noncancelable lease agreement between Wildhorse Leasing Company and Sheffield Company, a lessee.

Inception date	5/1/17
Annual lease payment due at beginning of each year, starting 5/1/17	$18,727.72
Bargain-purchase option price at end of lease term	$4,000
Lease term	5 years
Economic life of leased equipment	10 years
Lessor's cost	$62,000
Fair value of asset at 5/1/17	$82,000
Lessor's implicit rate	9%
Lessee's incremental borrowing rate	9%

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs.

Part A: Compute the amount of the lease receivable at the inception of the lease.

Part B: Prepare a lease amortization schedule for Wildhorse Leasing Company for the 5-year lease term.

Date	Annual Lease Payment + BPO	Interest on Lease Receivable	Recovery of Lease Receivable	Lease Receivable
5/1/17
5/1/17
5/1/18
5/1/19
5/1/20
5/1/21
4/30/22
	$	$	$

Part C: Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2017, 2018, and 2019. The lessors accounting period ends on December 31. Reversing entries are not used by Wildhorse.

Date	Account Title	Debit	Credit
5/1/17
	(To record the lease.)
	(To record lease payment. )
Date (?)
Date (?)
Date (?)
Date (?)
Date (?)