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: a. Ten annual payments of $61,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $346,464. C. The lease qualifies as a finance lease/sales-type lease. d. 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. e. 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.) Decrease in Balance Outstanding Balance Payments Effective Interest (11% ~ Outstanding balance) 1/1/2021 12/31/2021 12/31/2022 53,000 53,000 53,000 0.11 (293,464) = 32,281 0.11 (272,745) 30,002 53,000 20,719 22,998 346,464 293,464 272,745 249, 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. Required 1 Required 2 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 1 346,464 January 01, 2021 Right-of-use asset Lease payable 346,464 2 January 01, 2021 Lease payable 53,000 Cash 53,000 3 December 31, 202 Lease payable 20,719 32,281 Interest expense Cash 53,000 X 4 34,636 X December 31, 202 Amortization expense Right-of-use asset 34,636 X Required 1 Required 2 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 receivable 530,000 X Sales revenue 530,000 2 January 01, 2021 Cash 53,000 Lease receivable 53,000 3 December 31, 202 Cash 53,000 X Lease receivable 53,000 X Required 1 Required 2
