Exercise 21A-21 a-d Marigold Incorporated leases a piece of equipment to Splish Brothers Corporation on January 1, 2017. The lease agreement called for annual rental payments of $5,000 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,800, a book value of $20,800, and both parties expect a residual value of $8,100 at the end of the lease term, though this amount is not guaranteed. Marigold set the lease payments with the intent of earning a 4% return, and Splish Brothers is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Your answer is correct. Determine the nature of the lease to both Marigold and Splish Brothers. an operating lease to Marigold. The lease is a/an operating lease to Splish Brothers. SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Prepare the lease amortization schedule(s) for Splish Brothers for all 4 years of the lease. (Round answers to o decimal places, e.g. 5,175.) SPLISH BROTHERS CORPORATION Lease Amortization Schedule Annuity-Due Basis Reduction of Annual Payment Interest on Liability Lease Liability Lease Liability Date 1/1/17 27259 11/27 9 5000 a Your answer is partially correct. Try again. Prepare the lease amortization schedule(s) for Splish Brothers for all 4 years of the lease. (Round answers to 0 decimal places, e.g. 5,175.) SPLISH BROTHERS CORPORATION Lease Amortization Schedule Annuity-Due Basis Reduction of Date Annual Payment Interest on Liability Lease Liability Lease Liability 1/1/17 27259 1/1/17 5000 1/1/18 5000 1/1/19 7 1/1/20 7 5000 5000 1/1/20 5000 Lease Expense Schedule Lease Expense Interest on Amortization of Carrying Value of (Straight-Line) Lease Liability ROU Asset ROU Asset Date 1/1/17 12/31/17 12/31/18 12/31/19 12/31/20 Your answer is partially correct. Try again. Prepare the journal entries for Splish Brothers for 2017 and 2018. (Credit account titles are automatically indented when the Date Account Titles and Explanation Debit Credit 1/1/17 Right-of-Use Asset Lease Liability (To record the lease) 1/1/17 Lease Liability Cash (To record lease liability) 12/31/17 TLease Expense Lease Liability 02 00 OLODUOTI JO DO PODDODDI Right-of-Use Asset 1/1/18 TLease Liability TCash 12/31/18 Lease Expense Lease Liability Right-of-Use Asset Your answer is partially correct. Try again. Suppose Splish Brothers incurs initial direct costs of $800 related to the lease. Prepare the journal entries for 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/17 Right-of-Use Asset Cash Lease Liability (To record the lease) 1/1/17 Lease Liability 000 OD DOO Cash (To record lease liability) 12/31/17 T Lease Expense Lease Liability Right-of-Use Asset Click if you would like to Show Work for this question: Open Show Work
