Lease Accounting

Angelo Incorporated leases a piece of machinery to Ghandra, Company on January $1,2017,$ under the following terms.

The lease is to be for $4$ years with rental payments of $$15,599$ to be made at the beginning of each year.

The machinery' has a fair value of $$77,000,$ a book value of $$50,000,$ and an economic life of $10$ years.

At the end of the lease term, both parties expect the machinery to have a residual value of $$23,000.$ To protect against a large loss, Angelo requests Gbandra, to guarantee $$17,500$ of the residual value, which Ghandra, agrees to do$.$

The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature.

The implicit rate is $5\%,$ which is known by Ghandra,

Collectibility of the payments is probable.

Part A $(4$ points$)$: Show how Angelo Incorporated calculated the annual rental payment of $$15,599.$

Part B $(5$ points$)$: Using the lease classification tests, what type of lease is this for Ghandra. Company? Please note which tests it passes and which it fails $($must show all $5$ tests$).$

Part C $(1$ point$)$: Calculate the Lease Liability for Ghandra. Company.

Part $(6$ points$)$: Prepare the Amortization Table for Goandra Company.

Part E $(12$ points$)$: Prepare the journal entries for Ghandra, for the year $2017.$

Part F $(1$ point$)$: What type of lease is this for Angelo? Note: You can rely on the classification tests you performed in Part B

Part G $(1$ point$)$: Calculate the Lease Receivable for Angelo

Part H $(6$ points$)$: Prepare the amortization table for Angelo

Part I $(12$ points$)$: Prepare the journal entries for Angelo for the year $2017.$

Part J $(1$ point$)$: Suppose Ghandra, did not guarantee any amount of the expected residual value. Does that change the lease classification? Why or why not?

Part K $(12$ points$)$: Given your work in $($J$)$: prepare the journal entries for Ghandra, for the year $2017.$

Part L $(9$ points$)$: Given your work in $($J$)$: prepare the journal entries for Angelo for the year $2017.$