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Problem III (15 points): Balmy, Inc. purchased equipment costing immediately leased the equipment to Cline Company for a live paid at the end of each
Problem III (15 points): Balmy, Inc. purchased equipment costing immediately leased the equipment to Cline Company for a live paid at the end of each year. The lessor's implicit interest rate in is expected to have a residual value of $10,000 at the end of the life of 11 years. The collectability of the lease pay ((Note: Present value of an ordinary annuity of 1 for pe 1 for 5 periods at 6% is 4.46511. Present value of ting 32,747 on January 1, 2019. Balmy "period with rental payments of $6,000 to be connection with the lease is 6%. The equipment moncancelable lease, unguaranteed, and useful cctability of the lease payments is probable for the lessor. for periods at 6% is 4.21236, of an annuity due o Present value of 1 for 5 periods at 6% is 0.74726). Instructions a. Classify the lease from the standpoint of the e and lessor, giving reasons (5 points). b. Prepare the journal entries of the lessee through December lessee through December 31, 2020 (10 points). c. Prepare the journal entries of the lessor through December 31, 2020 (5 bonus points)
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