Question 1: Cullumber Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2020, that requires 6 annual payments of $30,300 each, beginning September 1, 2020. In addition, Cullumber guarantees the lessor a residual value of $20,600 at lease end. The equipment has a useful life of seven years. Assume that for Moxey Corporation, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the equipments carrying amount is $140,000.

Prepare Moxeys September 1, 2020 journal entries, assuming an interest rate of 9%

Question 2: Blossom Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2020, that requires 6 annual payments of $29,600 each, beginning September 1, 2020. The equipment has a useful life of seven years. Assume that a residual value of $16,900 is expected at the end of the lease, but that Blossom does not guarantee the residual value.

Using (1) tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the capital lease. Prepare Blossoms September 1, 2020 journal entry, assuming an interest rate of 12% and that Merrill also uses ASPE.

Sept. 1 (To record inception of lease.) Sept. 1 (To record cost of goods sold.) Sept. 1 (To record first lease payment.) Account Titles and Explanation Debit Credit (To record inception of lease and first lease payment.)