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Sandhill Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and
Sandhill Limited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessor of $197,000. The terms of the lease are as follows: The lease term begins on January 1, 2019, and runs for 5 years. . The lease requires payments of $44,120 at the beginning of each year starting January 1, 2019. . At the end of the lease term, the equipment is to be returned to the lessor. Lantus' implied interest rate is 6%, while Sandhill's borrowing rate is 7%. Sandhill uses straight-line depreciation for similar equipment. The year-end for both companies is December 31. Assume that both companies follow ASPE. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. * Your answer is incorrect. Determine the present value of the minimum lease payments. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, eg. 5,275.) $ Present Value Prepare Sandhill's lease amortization schedule using the effective interest method. (Round answers to O decimal places, e.g. 5,275.) Date Payment Interest Principal Balar January 1, 2019 January 1, 2019 $ ta $ January 1, 2020 January 1, 2021 January 1, 2022 ION II LUT January 1, 2023 ta $ ta $ Prepare the 2019 journal entries for Sandhill Limited. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit 2019 Jan. 1 Equipment under Lease 197000 Obligations under Lease 197000 (To record inception of lease.) Jan. 1 Obligations under Lease Cash (To record lease payment.) ULTI Dec. 31 Interest Expense Obligations under Lease (To record interest.) Dec. 31 Depreciation Expense Accumulated Depreciation-Leased Equipment (To record depreciation expense.)
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