Exercise 21A-10 a-d The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Teal Mountain Company, a lessee Commencement date Annual lease payment due at the beginning of May 1, 2017 $17,225.30 $4,000 each year, beginning with May 1, 2017 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate 5 years 10 years $55,000 $77,000 8% 8% The collectibility of the lease payments by Sandhill is probable (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 5/1/21 4/30/22 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 2017 and 2018. Teal Mountain's annual accounting period ends on December 31. Reversing entries are used by Teal Mountain. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record the first lease payment) (To record interest expense) (To record amortization of the right-of-use asset) (To record interest expense) (To record amortization of the right-of-use asset) Exercise 21A-10 a-d The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Teal Mountain Company, a lessee Commencement date Annual lease payment due at the beginning of May 1, 2017 $17,225.30 $4,000 each year, beginning with May 1, 2017 Bargain purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate 5 years 10 years $55,000 $77,000 8% 8% The collectibility of the lease payments by Sandhill is probable (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) 5/1/21 4/30/22 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 2017 and 2018. Teal Mountain's annual accounting period ends on December 31. Reversing entries are used by Teal Mountain. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record the first lease payment) (To record interest expense) (To record amortization of the right-of-use asset) (To record interest expense) (To record amortization of the right-of-use asset)
