Oakridge Leasing Corporation signs an agreement on January 1, 2020, to lease equipment to Wildhorse Limited. Oakridge and Wildhorse follow ASPE. The following information relates to the agreement. 1. 2. 3. 4. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. The asset's fair value at January 1, 2020, is $81,000. 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 $6,700, which is not guaranteed. Wildhorse Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $940 to Rocky Mountain Insurance Ltd. for insurance and $1,660 to James Township for property taxes. The agreement requires equal annual rental payments of $19.121 to Oakridge, the lessor, beginning on January 1, 2020. 5. 6. The lessee's incremental borrowing rate is 13%. The lessor's implicit rate is 12% and is known to the lessee. 7. Wildhorse Limited uses the straight-line depreciation method for all equipment. 8. Wildhorse uses reversing entries when appropriate. Calculate the PV of the future minimum lease payments using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel functions. (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, es 1,452) Present value $ Prepare an amortization schedule for Wildhorse Limited for the lease term. (Hint: You may find the ROUND formula helpful for rounding in Excel) (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, eg 1,452) Wildhorse Limited (Lessee) Lease Amortization Schedule Annual Lease Date Payment 1/1/20 1/1/20 $ Interest on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation $ Prepare an amortization schedule for Wildhorse Limited for the lease term. (Hint: You may find the ROUND formula helpful for rounding in Excel) (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, eg 1,452) Wildhorse Limited (Lessee) Lease Amortization Schedule Annual Lease Date Payment 1/1/20 1/1/20 $ 1/1/21 1/1/22 1/1/23 1/1/24 $ Interest on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation Prepare all of Wildhorse's journal entries for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31 and that Wildhorse uses reversing entries. (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 O for the amounts. Round answers to O decimal places, eg. 5,275) Date Account Titles and Explanation 1/1/20 During 2020 (To record inception of lease and first lease payment.) During (To record payment of insurance.) Debit Credit During 2020 (To record payment of insurance.) 12/31/20 (To record payment of property taxes.) 12/31/20 (To record interest.) 1/1/21 (To record depreciation expense.) Corcual reversing entry) 1/1/21 (To record depreciation expense.) 1/1/21 (To record interest accrual reversing entry.) During 2021 (To record lease payment.) (To record payment of insurance.) (To record payment of property taxes.) IND Show the dollar amounts that Oakridge, the lessor, used to arrive at the lease payment amount of $19.121. (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, eg. 5,275) Fair market value of leased asset to lessor Less: PV of unguaranteed residual value Amount to be recovered through lease payments $ Five periodic lease payments