Exercise 21-9

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

Inception date:		May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017		$21,117.02
Bargain-purchase option price at end of lease term		$3,800
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$59,000
Fair value of asset at May 1, 2017		$92,000
Lessors implicit rate		9	%
Lessees 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.

Compute the amount of the lease receivable at the inception of the lease. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 16.25.)

Lease receivable at inception

$

Prepare a lease amortization schedule for Waterway Leasing Company for the 5-year lease term.

Date	Annual Lease Payment Plus 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

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 Waterway.