Sheffield Corporation manufactures specialty equipment with an estimated economic life of 12 years and leases it to Martinez Airlines Corp. for a period of 10 years. Both Sheffield and Martinez Airlines follow ASPE. The equipments normal selling price is $199,227 and its unguaranteed residual value at the end of the lease term is estimated to be $14,800. Martinez Airlines will make annual payments of $25,500 at the beginning of each year and pay for all maintenance and insurance. Sheffield incurred costs of $104,000 in manufacturing the equipment and $6,900 in negotiating and closing the lease. Sheffield has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 10%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Using tables, a financial calculator, or Excel functions, calculate the PV of the lease payments and unguaranteed residual value under the lease. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

PV of the lease payments and unguaranteed residual value $???????

Describe the nature of the lease.

The lease is ????? a sales-type leasea manufacturer or dealer lease to Sheffield Corporation.

Calculate the amount of each of the following items: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

1.		Gross investment		$
2.		Unearned interest income		$
3.		Sale price		$
4.		Cost of goods sold		$

Prepare a 10-year lease amortization schedule for the lease obligation using Excel. (Round answers to 0 decimal places, e.g. 5,275.)

Sheffield CORPORATION (Lessor) Lease Amortization Schedule Annuity Due Basis, Unguaranteed Residual Value
Beginning of Year		Annual Lease Payment Plus Residual Value		Interest on Net Investment		Net Investment Recovery		Net Investment
Initial PV								$
1		$		$		$
2
3
4
5
6
7
8
9
10
End of 10
		$		$		$

List of Accounts

Prepare all of the lessors journal entries for the first year of the lease, assuming the lessors fiscal year end is five months into the lease. Reversing entries are not used. (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 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
Beginning of Lease Year 1
(To record inception of lease and cost of goods sold.)
(To record payment of initial direct costs.)
(Collection of lease payment.)
End of fiscal Year 5 months after signing lease
(To record interest.)
12 months after signing lease
(To record interest.)

List of Accounts

Determine the current and non-current portions of the net investment at the lessors fiscal year end, which is five months into the lease. (Round answers to 0 decimal places, e.g. 5,275.)

Current portion		$
Non-current portion
Total		$