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Wadkins Company, a machinery dealer, leased a machine to Romero Corporation on January 1, 2012. The lease is for an 8year period and requires equal annual payments of $45,749 at the beginning of each year. The first payment is received on January 1, 2012. Wadkins had purchased the machine during 2011 for $167,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Wadkins. Wadkins set the annual rental to ensure an 9% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wadkins at the termination of the lease. Don't show me this message again for the assignment (a) Compute the amount of the lease receivable. (Round present value factor c e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The amount of the lease receivable $ Ludwick Steel Company as lessee signed a lease agreement for equipment for 5 years, beginning December 31, 2012. Annual rental payments of $64,800 are to be made at the beginning of each lease year (December 31). The taxes, insurance, and the maintenance costs are the obligation of the lessee. The interest rate used by the lessor in setting the payment schedule is 9%; Ludwick's incremental borrowing rate is 10%. Ludwick is unaware of the rate being used by the lessor. At the end of the lease, Ludwick has the option to buy the equipment for $1, considerably below its estimated fair value at that time. The equipment has an estimated useful life of 7 years, with no salvage value. Ludwick uses the straightline method of depreciation on similar owned equipment. Don't show me this message again for the assignment (a) Prepare the journal entry, that should be recorded on December 31, 2012, by are automatically indented when amount is entered. Do not indent manu factor calculations to 5 decimal places, e.g. 1.25124 and the final answer 58,971.) Account Titles and Explanation (To record the lease.) Debit Credit Jacobsen Leasing Company leases a new machine that has a cost and fair value of $78,500 to Stadler Corporation on a 3year noncancelable contract. Stadler Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3year useful life and no residual value. The lease was signed on January 1, 2013. Jacobsen Leasing Company expects to earn a 10% return on its investment. The annual rentals are payable on each December 31. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (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.) Rent Receipt/ Payment 1/1/13 12/31/13 12/31/14 12/31/15 $ Interest Revenue/ Expense Reduction of Principal $ Receivable/ Liability $ $ Jacobsen Leasing Company leases a new machine that has a cost and fair value of $78,500 to Stadler Corporation on a 3year noncancelable contract. Stadler Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3year useful life and no residual value. The lease was signed on January 1, 2013. Jacobsen Leasing Company expects to earn a 10% return on its investment. The annual rentals are payable on each December 31. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (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.) Rent Receipt/ Payment 1/1/13 12/31/13 12/31/14 12/31/15 $ Interest Revenue/ Expense Reduction of Principal $ Receivable/ Liability $ $
