Item19

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Item 19

Item 19 5 points

On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 11% rate of return for providing long-term financing. The lease agreement specified the following:

1. Ten annual payments of $61,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029.
2. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $346,464.
3. The lease qualifies as a finance lease/sales-type lease.
4. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $8,000 per year are specified, beginning January 1, 2021. NRC was to pay this cost as incurred, but lease payments reflect this expenditure.
5. A partial amortization schedule, appropriate for both the lessee and lessor, follows:

(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

	Payments	Effective Interest	Decrease in Balance	Outstanding Balance
		(11% Outstanding balance)
				346,464
1/1/2021	53,000		53,000	293,464
12/31/2021	53,000	0.11 (293,464) = 32,281	20,719	272,745
12/31/2022	53,000	0.11 (272,745) = 30,002	22,998	249,747

Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021.

Prepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Date	General Journal	Debit	Credit
1	January 01, 2021	Right-of-use assetselected answer correct	346,464selected answer correct	not attempted
		Lease payableselected answer correct	not attempted	346,464selected answer correct
2	January 01, 2021	Lease payableselected answer correct	53,000selected answer correct	not attempted
		Lease receivableselected answer incorrect	not attempted	32,281selected answer incorrect
		Interest revenueselected answer incorrect	not attempted	20,719selected answer incorrect
3	December 31, 2021	Lease payableselected answer correct	20,719selected answer correct	not attempted
		Interest expenseselected answer correct	32,281selected answer correct	not attempted
		Sales revenueselected answer incorrect	not attempted	53,000selected answer incorrect
4	December 31, 2021	Amortization expenseselected answer correct	34,646selected answer correct	not attempted
		Right-of-use assetselected answer correct	not attempted	34,646selected answer correct

• Required 1

Prepare the appropriate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Date	General Journal	Debit	Credit
1	January 01, 2021	Lease receivableselected answer correct	530,000selected answer incorrect	not attempted
		Sales revenueselected answer incorrect	not attempted	530,000selected answer incorrect
2	January 01, 2021	Cashselected answer correct	20,719selected answer incorrect	not attempted
		Lease receivableselected answer correct	not attempted	20,719selected answer incorrect
3	December 31, 2021	Cashselected answer correct	53,000selected answer incorrect	not attempted
		Lease receivableselected answer correct	not attempted	53,000selected answer incorrect

• Required 2