Grouper Corporation entered into a lease agreement on January 1, 2020, to provide Sheridan Company with a piece of machinery. The terms of the lease agreement were as follows. 1. 2 3. 4. The lease is to be for 3 years with rental payments of $14,474 to be made at the beginning of each year. The machinery has a fair value of $62,000, a book value of $40,000, and an economic life of 8 years. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000, none of which is guaranteed. The lease does not transfer ownership at the end of the lease term, does not have a bargain purchase option, and the asset is not of a specialized nature. The implicit rate is 5%, which is known by Dawkins. Collectibility of the payments is probable. 5. 6. Click here to view factor tables. x Your answer is incorrect. Try again. Evaluate the criteria for classification of the lease, and describe the nature of the lease. finance lease sales-type lease v For the lessee, it is a and for the lessor, it is a SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the amortization schedules Sheridan will use over the lease term. SHERIDAN COMPANY Lease Amortization Schedule Annuity-Due Basis Interest Reduction of on Liability Lease Liability Date Annual Payment Lease Liability 1/1/20 39416 1/1/20 14744 1971 12503 26913 X X 1/1/21 14744 1346 13128 13784 1/1/22 14744 689 13784 Lease Expense Schedule (C) Amortization of (B) Right-of-Use Asset Interest on (and Liability) Lease Liability (A-B) (A) Straight-Line Expense Carrying Value of Right-of-Use Asset Date 1/1/20 39416 12/31/20 14474 1971 12503 26913 1000 X 12/31/21 14474 1346 13128 13784 x 12/31/22 14474 689 13784 0 SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the 2020 journal entries for Sheridan. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit X Jan. 17Right-of-Use Asset 39416 x Lease Liability 39416 (To record lease) . Jan. 1 Lease Liability 14474 Cash 14474 (To record first lease payment) Dec. 31TLease Expense 14474 Lease Liability 1971 12503 Right-of-Use Asset (To record lease expense and amortization) SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Prepare the 2020 journal entries for Grouper. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1TCash 14474 X Lease Receivable 14474 (To record lease payments) Dec. 31 Lease Receivable 14474 14474 Lease Revenue (To record lease revenue) Dec. 31 Depreciation Expense 5000 5000 Accumulated Depreciati (To record depreciation) SHOW LIST OF ACCOUNTS LINK TO TEXT Your answer is partially correct. Try again. Suppose the lease were only for one year instead of 3 years, with just one lease payment at the beginning of the lease term. Prepare any journal entries Sheridan would need, assuming it elects to use the short-term lease option. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to o decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit Jan. 1 TRight-of-Use Asset 13785 X Lease Liability 13785 Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT
