Exercise 21-9

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

Inception date:		May 1, 2014
Annual lease payment due at the beginning of
each year, beginning with May 1, 2014		$17,967.35
Bargain-purchase option price at end of lease term		$3,690.00
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$60,900.00
Fair value of asset at May 1, 2014		$75,900.00
Lessors implicit rate		11	%
Lessees incremental borrowing rate		11	%

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.

a. 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.)

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

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 2014, 2015, and 2016. The lessors accounting period ends on December 31. Reversing entries are not used by Mooney.Accounting