Question
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
| 1. | The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. |
| 2. | The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. |
| 3. | The equipment has a fair value of $500,000. |
| 4. | Ten-Care agrees to pay all executory costs directly to a third party. |
| 5. | The lease contains no renewal or bargain purchase option. |
| 6. | The interest rate implicit in the lease is 14%. |
| 7. | The initial direct costs are insignificant and assumed to be zero. |
| 8. | It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. |
Required:
| 1. | Next Level Assuming that the lease is a sales-type lease from Rexons point of view, calculate the amount of the equal rental receipts. |
| 2. | Prepare a table summarizing the lease receipts and interest income earned by Rexon. |
| 3. | Prepare journal entries for Rexon for the years 2019 and 2020. |
1. Assuming that the lease is a sales-type lease from Rexons point of view, calculate the amount of the equal rental receipts.
| Date | Annual Lease Payment Received | Interest Income at 14% on Net Investment | Reduction of Lease Receivable | Lease Receivable | |
| 2 | January 1, 2019 |
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| 3 | December 31, 2019 |
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| 4 | December 31, 2020 |
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| 5 | December 31, 2021 |
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| 6 | December 31, 2022 |
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| 7 | December 31, 2023 |
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| 8 | December 31, 2024 |
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| 9 | December 31, 2025 |
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repare journal entries for Rexon for 2019.
General Journal Instructions
Question not attempted.
PAGE 2019
GENERAL JOURNAL
Score: 0/88
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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Points:
0 / 17
Feedback
Check My Work
Record the sale and cost of sale on January 1 and record a compound entry on December 31 for the cash receipt. Use the amounts on the Analysis page.
3b. Prepare journal entries for Rexon for 2020.
Question not attempted.
PAGE 2020
GENERAL JOURNAL
Score: 0/37
| DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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Intermediate Accounting
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
10th Edition
324300980, 978-0324300987
