PLEASE SHOW CALCULATIONS,

THANK YOU!

I. Accounting for Leases Walker Company (lessor) agrees to lease equipment to Gengler Company (lessee) on January 1, 2020, on a noncancelable lease. The following information relates to the lease agreement. a. The term of the lease is 9 years with no renewal option and no bargain purchase option. The equipment is expected to have an economic life of 12 years. b. The cost of the equipment is $684,000, and the fair value of the asset on January 1, 2020, is $882,000. c. At the end of the lease term, the equipment reverts to the lessor. d. The equipment has an unguaranteed residual value of $68,000. e. The lease agreement requires equal annual rental payments, beginning January 1, 2020. f. The collectability of the lease payments is reasonably predictable. g. Walker desires an 6% rate of return on its investments. Gengler's incremental borrowing rate is 8%. The lessor's implicit rate is known to the lessee. Instructions: 1. What type of lease is this to Gengler? Why? 2. What type of lease is this to Walker? Why? 3. Calculate the amount of the annual rental payment required by the lease. 4. Prepare the journal entry or entries for Gengler for 2020. You must show all calculations using the time value of money tables to receive full credit! Use the answer sheet provided for your answer. DO NOT PUT MORE THAN ONE PROBLEM ON A PAGE. TABLE 6-1 FUTURE VALUE OF 1 (FUTURE VALUE OF A SINGLE SUM) FVF, = (1 + i)" In) Periods 2% 24% 3% 4% 1 1.02000 1.02500 1.03000 1.04000 2 1.04040 1.05063 1.06090 1,08160 3 1.06121 1.07689 1.09273 1.12486 4 1.08243 1.10381 1.12551 1.16986 5 1.10408 1.13141 1.15927 1.21665 5% 1.05000 1.10250 1.15763 1.21551 1.27628 6% 1.06000 1.12360 1.19102 1.26248 1.33823 6 7 8 9 10 1.12616 1.14869 1.17166 1.19509 1.21899 1.15969 1.18869 1.21840 1.24886 1.28008 1.19405 1.22987 1.26677 1.30477 1.34392 1.26532 1.31593 1.36857 1.42331 1.48024 1.34010 1.40710 1.47746 1.55133 1.62889 1.41852 1.50363 1.59385 1.68948 1.79085 11 12 13 14 15 1.24337 1.26824 1.29361 1.31948 1.34587 1.31209 1.34489 1.37851 1.41297 1.44830 1.38423 1.42576 1.46853 1.51259 1.55797 1.53945 1.60103 1.66507 1.73168 1,80094 1.71034 1.79586 1.88565 1.97993 2.07893 1.89830 2.01220 2.13293 2.26090 2.39656 16 17 18 19 20 1.37279 1.40024 1.42825 1.45681 1.48595 1.48451 1,52162 1.55966 1.59865 1.63862 1.60471 1.65285 1.70243 1.75351 1.80611 1.87298 1.94790 2.02582 2.10685 2.19112 2.18287 2.29202 2.40662 2.52695 2.65330 2.54035 2.69277 2.85434 3.02560 3.20714 21 22 23 24 25 1.51567 1.54598 1.57690 1.60844 1.64061 1.67958 1.72157 1.76461 1.80873 1.85394 1.86029 1.91610 1.97359 2.03279 2.09378 2.27877 2.36992 2.46472 2.56330 2.66584 2.78596 2.92526 3.07152 3.22510 3.38635 3.39956 3.60354 3.81975 4.04893 4.29187 26 27 28 29 30 1.67342 1.70689 1.74102 1.77584 1.81136 1.90029 1.94780 1.99650 2.04641 2.09757 2.15659 2.22129 2.28793 2.35657 2.42726 2.77247 2.88337 2.99870 3.11865 3.24340 3.55567 3.73346 3.92013 4.11614 4.32194 4.54938 4.82235 5.11169 5.41839 5.74349 31 32 33 34 35 1.84759 1.88454 1.92223 1.96068 1.99989 2.15001 2.20376 2.25885 2.31532 2.37321 2.50008 2.57508 2.65234 2.73191 2.81386 3.37313 3.50806 3.64838 3.79432 3.94609 4.53804 4.76494 5.00319 5.25335 5.51602 6.08810 6.45339 6.84059 7.25103 7.68609 36 37 38 39 40 2.03989 2.08069 2.12230 2.16474 2.20804 2.43254 2.49335 2.55568 2.61957 2.68506 2.89828 2.98523 3.07478 3.16703 3.26204 4.10393 4.26809 4.43881 4.61637 4,80102 5.79182 6.08141 6.38548 6.70475 7.03999 8.14725 8.63609 9.15425 9.70351 10.28572