Question
Q10 Recording Sales-Type Lease, Unguaranteed Residual ValueLessor Flint Company leased equipment to Land Company for a ve-year period. Flint paid $145,592 for the equipment, which
Q10 Recording Sales-Type Lease, Unguaranteed Residual ValueLessor Flint Company leased equipment to Land Company for a ve-year period. Flint paid $145,592 for the equipment, which equals its current carrying value (with estimated useful life of ve years). The lease commenced on January 1 of Year 1. Flint uses a target rate of return of 8% in all lease contracts. The rst payment was received on January 1 of Year 1, and Flints accounting periods end on December 31. The equipment reverts to Flint at the end of the lease term, at which time Flint estimates that the equipment will have an unguaranteed residual value of $6,200. Hint: Underlying assets carrying value equals its fair value at lease commencement. a. Compute the annual payment calculated by the lessor. b. Prepare a schedule of the lease receivable for the lessor for the full lease term. c. Provide journal entries for Year 1 and Year 2 for the lessor assuming that the equipment is held in the lessors Inventory account. d. Record the entry on December 31 of Year 5 for the return of the equipment assuming the equipment had a fair value of $6,200.
Recording Sales-Type Lease, Unguaranteed Residual Value-Lessor Flint Company leased equipment to Land Company for a five-year period. Flint paid $145,592 for the equipment, which equals its current carrying value (with estimated useful life of five years) The lease commenced on January 1 of Year 1 . Flint uses a target rate of return of 8% in all lease contracts. The first payment was received on January 1 of Year 1 , and Flint's accounting periods end on December 31 . The equipment reverts to Flint at the end of the lease term, at which time Flint estimates that the equipment will have an unguaranteed residual value of $6,200. Hint: Underlying asset's carrying value equals its fair value at lease commencement. a. Compute the annual payment calculated by the lessor. - Note: Round answer to the nearest dollar. - Note: Do not use a negative sign with your answer. s b. Prepare a schedule of the lease receivable for the lessor for the full lease term. - Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. c. Provide journal entries for Year 1 and Year 2 for the lessor assuming that the equipment is held in the lessor's Inventory account. - Note: Round your answers to the nearest whole dollar. d. Record the entry on December 31 of Year 5 for the return of the equipment assuming the equipment had a fair value of $6,200Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started