Problem 15-19 (Algo) Initial direct costs; sales-type lease (LO15-2, 15-7) Bidwell Leasing purchased a single-engine plane for its fair value of $834,564 and leased it to Red Baron Flying Club on January 1, 2021. (FV of $1. PV of $1. FVA of S1. PVA of $1. FVAD of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Terms of the lease agreement and related facts were: a. Eight annual payments of $150,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 through 2027. Red Baron knows that Bidwell Leasing's implicit interest rate was 12%. The estimated useful life of the plane is eight years. Payments were calculated as follows: Amount to be recovered (lair value) Lease payments at the beginning of each of the next eight years ($834,564+ 5.56376.) $834,564 $150,000 "Present value of an annuity due of $1: n = 8,1 = 12% b. Red Baron's incremental borrowing rate is 13% c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $22,267. Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both b. Red Baron's incremental borrowing rate is 13%. c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $22,267. Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 How should this lease be classified () by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? a Bidwell Leasing Red Baron Finance lease Finance loase b RE Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate final answers to nearest whole dollar.) Date General Journal Debit Credit January 01, 2021 Lease receivable 834,564 Right-of-use asset 834,564 Na 1 S 2 150,000 January 01, 2021 Building Lease payable 3 150,000 3 January 01,2021 Lease payable Lease receivable 150,000 3 150,000 4 January 01, 2021 Building Lease payable 150,000 150,000 5 150,000 . January 01, 2021 Interest payable Interest receivable Lease receivable S 82,148 67,852 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Bar Club. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Payments Decrease Interest in Balance Date 1/1/21 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 $ 1.200,000 86,243 77,954 68,588 58,005 46,045 32,531 213,757 583,123 150,000 63,757 72,046 81,412 91,995 103,955 117,469 (63,757) 616,877 Outstanding Balance 663,405 599,648 535,891 463,845 382,433 290,438 186,483 69,014 132,771 12/31/26 12/31/27 $ $ Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required Required 6 Required 7 Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing Interest revenue over the lease term. (Round your intermediate and final answers to nearest whole dollar) Effective rate of interest 13 i 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare an amortization schedule that describes the patter of interest revenue over the lease term for Bidwell Leasing. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Payments Decrease Outstanding Interest In Balance Balance Date $ 150,000 150,000 1/1/21 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 82,148 74,005 64,886 3 54,672 43,233 30,421 (74.005) (64,886) (54,672) (43.233) (30,421) (74,005) (138,891) (183,563) (236,796) (267,217) $ 300,000 349,365 $ 267,217 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bldwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required in the account field. Round your intermediate and final answers to nearest whole dollar) View transaction list es Journal entry worksheet Record the amortization expense for Red Baron Flying Club. Note: Enter debits before credits. Date December 31, 2027 General Journal Debit Credit Record entry Clear entry View general Journal Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and to nearest whole dollar.) View transaction list Journal entry worksheet 2 2 > Record the lease payment for Bidwell Leasing. Note: Enter debits before credits Date December 31, 2027 General Journal Debit Credit Record entry Clear entry View general Journal Problem 15-19 (Algo) Initial direct costs; sales-type lease (LO15-2, 15-7) Bidwell Leasing purchased a single-engine plane for its fair value of $834,564 and leased it to Red Baron Flying Club on January 1, 2021. (FV of $1. PV of $1. FVA of S1. PVA of $1. FVAD of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Terms of the lease agreement and related facts were: a. Eight annual payments of $150,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 through 2027. Red Baron knows that Bidwell Leasing's implicit interest rate was 12%. The estimated useful life of the plane is eight years. Payments were calculated as follows: Amount to be recovered (lair value) Lease payments at the beginning of each of the next eight years ($834,564+ 5.56376.) $834,564 $150,000 "Present value of an annuity due of $1: n = 8,1 = 12% b. Red Baron's incremental borrowing rate is 13% c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $22,267. Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both b. Red Baron's incremental borrowing rate is 13%. c. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $22,267. Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 How should this lease be classified () by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? a Bidwell Leasing Red Baron Finance lease Finance loase b RE Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate final answers to nearest whole dollar.) Date General Journal Debit Credit January 01, 2021 Lease receivable 834,564 Right-of-use asset 834,564 Na 1 S 2 150,000 January 01, 2021 Building Lease payable 3 150,000 3 January 01,2021 Lease payable Lease receivable 150,000 3 150,000 4 January 01, 2021 Building Lease payable 150,000 150,000 5 150,000 . January 01, 2021 Interest payable Interest receivable Lease receivable S 82,148 67,852 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Bar Club. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Payments Decrease Interest in Balance Date 1/1/21 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 $ 1.200,000 86,243 77,954 68,588 58,005 46,045 32,531 213,757 583,123 150,000 63,757 72,046 81,412 91,995 103,955 117,469 (63,757) 616,877 Outstanding Balance 663,405 599,648 535,891 463,845 382,433 290,438 186,483 69,014 132,771 12/31/26 12/31/27 $ $ Required: 1. How should this lease be classified (a) by Bidwell Leasing the lessor) and (b) by Red Baron (the lessee)? 2. Prepare the appropriate entries for both Red Baron Flying Club and Bidwell Leasing on January 1, 2021. 3. Prepare an amortization schedule that describes the pattern of interest expense over the lease term for Red Baron Flying Club. 4. Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing interest revenue over the lease term. 5. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Bidwell Leasing 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required Required 6 Required 7 Determine the effective rate of interest for Bidwell Leasing for the purpose of recognizing Interest revenue over the lease term. (Round your intermediate and final answers to nearest whole dollar) Effective rate of interest 13 i 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation 7. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare an amortization schedule that describes the patter of interest revenue over the lease term for Bidwell Leasing. (Round your intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.) Lease Amortization Schedule Effective Payments Decrease Outstanding Interest In Balance Balance Date $ 150,000 150,000 1/1/21 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 12/31/26 12/31/27 82,148 74,005 64,886 3 54,672 43,233 30,421 (74.005) (64,886) (54,672) (43.233) (30,421) (74,005) (138,891) (183,563) (236,796) (267,217) $ 300,000 349,365 $ 267,217 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bldwell Leasing on December 31, 2021 (the second lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required in the account field. Round your intermediate and final answers to nearest whole dollar) View transaction list es Journal entry worksheet Record the amortization expense for Red Baron Flying Club. Note: Enter debits before credits. Date December 31, 2027 General Journal Debit Credit Record entry Clear entry View general Journal Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Required 7 Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2027 (the final lease payment). required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and to nearest whole dollar.) View transaction list Journal entry worksheet 2 2 > Record the lease payment for Bidwell Leasing. Note: Enter debits before credits Date December 31, 2027 General Journal Debit Credit Record entry Clear entry View general Journal