Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Rhone Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone Metro leased equipment to Western Soya Co.for a noncancelable stated

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Rhone Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone Metro leased equipment to Western Soya Co.for a noncancelable stated lease term of four years ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone Metro. The equipment cost $320,000 to manufacture and has an expected useful life of six years. Its normal sales price is $404,357. The expected residual value of $18,000 at December 31, 2025, is not guaranteed. Western Soya Co is reasonably certain to exercise a purchase option on December 30, 2024, at an option price of $8,000. Equal payments under the lease are $147000 (including $4,000 annual maintenance costs) and are due on December 31 of each year. The first payment was made on December 31, 2021. Western Soya's incremental borrowing rate is 10% Western Soya knows the interest rate implicit in the tease payments is 8% Both companies use straight-line amortization Hint A lease term ends for accounting purposes when an option becomes exercisable if it's expected to be exercised (e. a BPO) EV of S1. PV of S1. EVA of S1. PVA of $1. EVAD of $1 and PVAD 5.1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Rhone-Metro calculated the $147,000 annual lease payments 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone Metro Industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Co and Rhone Metro on December 31, 2021 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor 5. Prepare the appropriate entries for both Western Soya and Rhone Metro on December 31, 2022 (the second rent payment and amortization) 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 30, 2024, assuming the purchase option is exercised on that date Lessor Required 1 Required 2 Required 3 Required 3 required * Required 4 Required 5 Required S Required 6 Required 6 Lese Lor Lessor Lessee Lessor Showhow Rhone Mercedes 2.000 ameniti (Round your intermediate and final answers to nearest whole dollar) BPO Price Table or calculator function Jook 1 ences Amount to be recovered Present Value Amount to be recovered through periodic lease payments Leane Payments Table or calculator function Lease payments at the beginning of each of three years Lease Payments Lease payments including executory costs Required 2 > Complete this question by entering your answers in the tabs below. Required Required 2 Med Required a quiered Regulreded equired Meiredo Reid 6 Les Lessor Stow should this lease be dancited (a) by Western Soya Co. (the le) and (b) by Rhone Metro industries (the ker)? Round your intermediate and finalwers to rest whole dollar) Les Western Soya Co Rhone-Metre les dentries (Required 1 Required 3 Lessee) 1 Prepare the appropriate entries for Western Soya Co. on December 31, 2021. (if no entry is required for a transaction/event, select "No ournal entry required in the first account field. Round your intermediate and final answers to nearest whole dollar) View transaction list Journal entry worksheet 1 2 Record lease in the books of lessee. Robert Enterdichts before credits Date December 31, 2021 General Journal Debit Credit Record entry Clear entry View general journal Prepare the appropriate entries for Western Soya Co. on December 31, 2021. (If no entry is required for a transaction/event, select Journal entry required in the first account field. Round your intermediate and final answers to nearest whole dollar.) View transaction list Journal entry worksheet Record lease in the books of lessot. Note Enter debits before credits General Journal Debit Credit Date December 31 2021 Prey 1 of 1 Next Required 1 Required 2 Required 3 Required 3 Required 4 Required 4 Required S Required S Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Prepare the appropriate entries for Rhone-Metro on December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar) View transaction list Journal entry worksheet Record cash received in the books of lessor, Note: Enter debits before credits General Journal Debit Credit Date December 31 2021 Complete this question by entering your answers in the tabs below. Required 1 required 2 Required 3 required 3 required 4 required a Required 5 Required 5 required 6 Required 6 Lessee Lessor Lesse Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee. (Round your Intermediate and final answers to nearest whole dollar. Enter all amounts as positive values.). Lesse Lessor Outstanding Balance Lease Amortization Schedule Effective Decrease in Dec 31 Payments Interest Balance 2021 2021 202 2023 2024 Complete this question by entering your answers in the tabs below. Required a required 2 Required 3 required 3 Required Required a Required required s srequired 6 required 6 Lessee Lessor Lessee Lessor Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessor (Round your Intermediate and final answers to nearest whole dollar. Enter all amounts as positive values... Lessee Lessor Lessee Lessor Lease Amortization Schedule Effective Decrease in Payments Interest Falance Outstanding Balance Dec. 31 2021 2021 2022 2023 2024 Lo Les Lesse Les Prepare the appropriate entries for West Soya Co. on December 31, 2022 (the second rent payment and amortization). (If no entry is Sequired for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations Round your final anwers to the nearest whole dollar amount View transaction list Journal entry worksheet 2 Record amortization expense in the books of lesset, terdedore credits General Journal December 31, 2022 Debi Recorded Clearly View general Journal Love LO Lee Prepare the appropriate entries for Western Soya Co. on December 31, 2022 (the second rent payment and amortization). (if no entry is required for a transaction, wtedt Normal entry required in the first account field. Do not found intermediate calculation Hoond your final answers to the nearest whole dollar amount) View transaction list Journal entry worksheet Record cash payment in the books of lessee, Note: Enter debits before credits Date December 31, 2022 General Journal Debit Credi Record entry Clear entry View general journal Prepare the appropriate entries for Rhone Metro on December 31, 2022 (the second rent payment and amortization). (if no entry is Frequired for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar View transaction list Journal entry worksheet Record amortization expense in the books of lessen Note: Enter debits before credits Dat General Journal Debit Credit December 31, 2024 A Record entry Clear entry View general Journal Prepare the appropriate entries for Western Saya Co. on December 30, 2024, assuming the purchase option is exercised on that date. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate and final answers to nearest whole dollar) View transaction list Journal entry worksheet Record cash payment for executory costs only in the books of lessee. Notes Enter debits before credits Date December 31, 2024 General Journal Debit Credit Hecord entry Chiar entry View general journal Prepare the appropriate entries for Western Soya Co. on December 30, 2024, assuming the purchase option is exercised on that date. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your intermediate and final answers to nearest whole dollar) View transaction fist Journal entry worksheet Record cash received for executory costs in the books of lessor. Note: Enter cubits before credits General Journal Debit Credit Date December 31, 2024

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Internationale Rechnungslegung IFRS Praxis

Authors: Author

1st Edition

3834909289, 9783834909282

More Books

Students also viewed these Accounting questions

Question

Describe an application of the differential equation y = k(M - y).

Answered: 1 week ago

Question

What are the eight types of intelligence? (p. 65)

Answered: 1 week ago