Morgan Leasing Company signs an agreement on January 1, 2014, to lease equipment to Cole Company. The following information relates to this agreement.

1.	The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years.
2.	The cost of the asset to the lessor is $247,000. The fair value of the asset at January 1, 2014, is $247,000.
3.	The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $48,388, none of which is guaranteed.
4.	Cole Company assumes direct responsibility for all executory costs.
5.	The agreement requires equal annual rental payments, beginning on January 1, 2014.
6.	Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.

Assuming the lessor desires a 11% rate of return on its investment, calculate the amount of the annual rental payment required.(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.)

Prepare an amortization schedule that would be suitable for the lessor for the lease term.(Round answers to 0 decimal places e.g. 58,971.)

MORGAN LEASING COMPANY (Lessor) Lease Amortization Schedule
Date	Annual Lease Payment Plus URV	Interest on Lease Receivable	Recovery of Lease Receivable	Lease Receivable
1/1/14	$
1/1/14	$	$	$
1/1/15
1/1/16
1/1/17
1/1/18
1/1/19
12/31/19
$	$	$

Prepare all of the journal entries for the lessor for 2014 and 2015 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume the lessor?s annual accounting period ends on December 31.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
1/1/14
(To record the lease.)
1/1/14
(To record lease payment.)
12/31/14
1/1/15
12/31/15

Here is the Chart of Accounts to use:

Accounts Payable

Accumulated Depreciation?Building

Accumulated Depreciation?Capital Leases

Accumulated Depreciation?Equipment

Airplanes

Buildings

Cash

Cost of Goods Sold

Depreciation Expense

Equipment

Executory Costs

Executory Costs Payable

Insurance Expense

Interest Expense

Interest Payable

Interest Receivable

Interest Revenue

Inventory

Land

Leased Buildings

Leased Equipment

Leased Land

Lease Liability

Lease Receivable

Loss on Capital Lease

Machinery

Maintenance and Repairs Expense

Prepaid Lease Executory Costs

Property Tax Expense

Property Tax Payable

Rent Expense

Rent Payable

Rent Receivable

Rent Revenue

Revenue from Sale-Leaseback

Salaries and Wages Expense

Sales Revenue

Selling Expenses

Trucks

Unearned Profit on Sale-Leaseback

Unearned Service Revenue

Attached is the Present Value of 1 table to use for Calculations

\fPrint by: KRISTIN CASTY AC410C X40 16M8W1 - D Hartman / ACC 410C - Chap 21 Homework - Hartman *Exercise 21-10 Morgan Leasing Company signs an agreement on January 1, 2014, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $247,000. The fair value of the asset at January 1, 2014, is $247,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $48,388, none of which is guaranteed. 4. Cole Company assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2014. 6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor. Your answer is correct. Assuming the lessor desires a 11% rate of return on its investment, calculate the amount of the annual rental payment required. (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.) The amount of the annual rental payment $ 47090 Your answer is partially correct. Try again. Prepare an amortization schedule that would be suitable for the lessor for the lease term. (Round answers to 0 decimal places e.g. 58,971.) MORGAN LEASING COMPANY (Lessor) Lease Amortization Schedule Date Annual Lease Payment Plus Interest on Lease Receivable Recovery of Lease Receivable Lease Receivable URV 1/1/14 $ 247000 $ 1/1/14 $ $0 53252 189648 53252 1/1/15 53252 22758 30494 159154 1/1/16 53252 19098 34154 125000 1/1/17 53252 15000 38252 86748 1/1/18 53252 10410 42842 43906 1/1/19 53252 5269 47983 (4077) 12/31/19 47350 (489) 47839 (51917) $ 319622 $ 74622 $ 245000 Your answer is partially correct. Try again. Prepare all of the journal entries for the lessor for 2014 and 2015 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume the lessor's annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit 1/1/14 Lease Receivable Credit 247000 Equipment 247000 (To record the lease.) 1/1/14 Cash 53252 Lease Receivable 53252 (To record lease payment.) 12/31/14 Interest Receivable 22758 Interest Revenue 1/1/15 Cash 22758 53252 Lease Receivable 30494 Interest Receivable 22758 12/31/15 Interest Receivable 19058 Interest Revenue Copyright 2000-2016 by John Wiley & Sons, Inc. or related companies. All rights reserved. 19058 Question Attempts: 1 of 5 used