Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

> On January 1, 2024, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 11% rate

image text in transcribed

> On January 1, 2024, 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: 1. Ten annual payments of $56,000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. 2. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $330,121. 3. The lease qualifies as a finance lease/sales-type lease. 4. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,500 per year are specified, beginning January 1, 2024. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. 5. A partial amortization schedule, appropriate for both the lessee and lessor, follows: Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) Payments 1/1/2024 50,500 12/31/2024 50,500 12/31/2025 50,500 Effective Interest (11% x Outstanding balance) Decrease in Outstanding Balance Balance 330,121 50,500 279,621 0.11 (279,621) = 30,758 0.11 (259,879) = 28,587 19,742 259,879 21,913 237,966 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2024 and December 31, 2024. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2024 and December 31, 2024. 1 Record lease by lessee. Note: Enter debits before credits. Date January 01, 2024 1 2 3 4 Record the cash payment. Note: Enter debits before credits. Date January 01, 2024 < 2 3 4 Record the cash payment. Note: Enter debits before credits. Date December 31, 2024 2 3 Record the amortization. Note: Enter debits before credits. Date December 31, 2024 1 2 3 Record lease by lessor. Note: Enter debits before credits. General Journal Debit Credit Date General Journal Debit Credit January 01, 2024 < 1 2 3 Record the cash received (include maintenance fee accrual). General Journal Debit Credit Note: Enter debits before credits. Date January 01, 2024 General Journal Debit Credit General Journal Debit Credit General Journal Debit Credit 1 2 3 Record cash received by lessor. Note: Enter debits before credits. Date December 31, 2024 General Journal Debit Credit >

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Comparative international accounting

Authors: Christopher nobes, Robert parker

9th Edition

273703579, 978-0273703570

More Books

Students also viewed these Accounting questions