Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying and requires an interest rate implicit in the lease that is one percent below alternate methods of financing. On September 30, 2021, the company leased a delivery truck to a local florist, Anything Grows. The fiscal year for both companies ends December 31. The lease agreement specified quarterly payments of $3,000 beginning September 30, 2021, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2024 (three-year lease term). The florist had the option to purchase the truck on September 29, 2023. for $6,000 when it was expected to have a residual value of $10,000. The estimated useful life of the truck is four years. Mid-South Auto Leasing's quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $25,000 for the truck. Both companies use straight-line depreciation or amortization. Anything Grows incremental interest rate is 12%. Hint: A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (.e., a BPO). (FV of S1, PV of $1. FVA of $1. PVA of S1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the amount of selling profit that Mid-South would recognize in this sales-type lease. (Be careful to note that, although payments occur on the last calendar day of each quarter, since the first payment was at the beginning of the lease, payments represent an annuity due.) 2. Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. 3. Prepare an amortization schedule(s) describing the pattern of Interest expense for Anything Grows and interest revenue for Mid-South Auto Leasing over the lease term. 4. Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, 2021. 5. Prepare the appropriate entries for Anything Grows and Mid-South on September 29, 2023, assuming the purchase option was exercised on that date. action/event, select "No journal entry required in the test account the Round your Journal entry worksheet Record the beginning of the stor grow C September 30 Pop 55 Next Required 5 Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. (If no ento transaction/event, select "No journal entry required in the first account field. Round your intermediat whole dollar.) View transaction list Journal entry worksheet Record the cash payment for Anything Grows. Note: Enter debits before credits General Journal Debit Credit Date September 30, 2021 Required 1 Required 2 Required 3 Required 4 Required s Prepare the appropriate entries for Anything Grows and Mid-South on September 30, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers whole dollar.) View transaction list Journal entry worksheet Anything Grows and Mid-South on September 30, 2021. (If no entry transaction/event, select "No journal entry required in the first account field. Round your intermediate whole dollar) View transaction list Journal entry worksheet 2 3 Record the cash received by Mid-South Note Enter debit before credits General Journal Debit Credit Date September 30, 2021 Next Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the appropriate entries for Anything Grows and Mid-South Auto Leasing on December 31, transaction/event, select "No journal entry required in the first account field. Round your intermed whole dollar.) View transaction fist Journal entry worksheet Intermediate and final answers to nearest whole dollar.) View transaction list Journal entry worksheet
