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Question 5 of 6 49217 4.92/7 View Policies Show Attempt History Current Attempt in Progress Culver Corporation entered into a lease agreement on January 1, 2020, to provide Sunland Company with a piece of machinery The terms of the lease agreement were as follows. 1. 2. The lease is to be for 3 years with rental payments of $13,698 to be made at the beginning of each year 3 $. The machinery has a fair value of $64,000, a book value of $40,000, and an economic life of years. At the end of the lease term, both parties expect the machinery to have a residual value of $30,000, none of which is guaranteed. 3. 3 4. 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 6%, which is known by Sunland. Collectibility of the payments is probable. 5. 6. Click here to view factor tables (a) Your answer is correct. Evaluate the criteria for classification of the lease, and describe the nature of the lease For the lessee, it is a operating lease and for the lessor, it is al operating lease e Textbook and Media List of Accounts Attempts: 3 of 4 used Using multiple attempts will impact your score 50% score reduction after attempt 3 (b) Your answer is correct. Prepare the amortization schedules Sunland will use over the lease term SUNLAND COMPANY Lease Amortization Schedule Annuity-Due Basis Date Annual Payment Interest on Liability Reduction of Lease Liability 1/1/20 1/1/20 $ 13698 D 13698 1/1/21 13698 1507 12191 1/1/22 13698 775 12923 [ Lease Expense Schedule (A) Straight-Line Expense B) Interest on Lease Liability C) Amortization of Right-of-Use Asset (and Liability) (A-B) Date 1/1/20 12/31/20 $ 13698 1507 12191 12/31/21 13698 775 12923 12/31/22 13698 D 13698 e Textbook and Media List of Accounts Attempts: 3 of 4 used Using multiple attempts will impact your score. 50% score reduction after attempt 3 (c) . Your answer is partially correct. Prepare the 2020 journal entries for Sunland. (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 for the amounts. Round present value factor calculations to 5 decimal places, eg 1.25124 and the final answer to Odecimal places eg 58,971) Debit Credit Date Account Titles and Explanation Jan. Right-of-Use Asset 1 64,00C Lease Liability 64001 To record lease) Jan. 1 Lease Liability 13,698 Cash 13.69 (To record first lease payment) Dec 31 Lease Expense 13,698 Lease Liability 5,121 Right-of-Use Asset 8.571 (To record lease expense and amortization) eTextbook and Media List of Accounts Save for Later Attempts: 1 of 4 used Submit Answer Using multiple attempts will impact your score 50% score reduction after attempt 3