Shamrock Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $451,000. The fair value of the asset at January 1, 2017, is $451,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,225, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2017. 5. Collectibility of the lease payments by Shamrock is probable.
Shamrock Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $451,000. The fair value of the asset at January 1, 2017, is $451,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,225, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2017. 5. Collectibility of the lease payments by Shamrock is probable. Click here to view the factor table. Your answer is correct. Assuming the lessor desires a 10% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places eg. 5,275.) Amount of the annual rental payment $ 91285 e Textbook and Media List of Accounts Your answer is correct. Prepare an amortization schedule that is suitable for the lessor for the lease term. (Round answers to decimal places e.g. 5,275.) SHAMROCK LEASING COMPANY (Lessor) Lease Amortization Schedule Interest on Lease Recovery of Lease Receivable Receivable Annual Lease Payment Plus URV Date Lease Receivable 0 0 $ 0 $ 451000 1/1/17 1/1/17 0 91285 359715 1/1/18 91285 91285 91285 35972 55313 304402 1/1/19 60844 243558 30440 24356 1/1/20 91285 66929 1/1/21 73622 91285 91285 24225 17663 10301 176629 103007 22023 0 1 1/1/22 80984 12/31/22 2202 22023 451000 $ 571933 $ 120933 $ Prepare all of the journal entries for the lessor for 2017 and 2018 to record the lease agreement, the receipt of lease payments, and the recognition of revenue. Assume the lessor's annual accounting period ends on December 31, and it does not use reversing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Debit Credit Account Titles and Explanation Lease Receivable 1/1/17 Cost of Goods Sold 451000 Sales Revenue Inventory (To record the lease) Cash 1/1/17 Lease Receivable (To record the receipt of lease payment) 12/31/17 Lease Receivable Interest Revenue 1/1/18 Cash Lease Receivable 12/31/18 Lease Receivable Interest Revenue
