The following facts pertain to a non-cancelable lease agreement between Sandhill Leasing Company and Teal Mountain Company, a lessee. Commencement date May 1, 2020 Annual lease payment due at the beginning of each year, beginning with May 1, 2020 $15.852.19 Bargain purchase option price at end of lease term $5,000 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $50.000 Fair value of asset at May 1, 2020 $68,000 Lessor's implicit rate 11 % Lessee's incremental borrowing rate 11 % The collectibility of the lease payments by Sandhill is probable. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. Discuss the nature of this lease to Teal Mountain. The nature of this lease to Teal Mountain is a finance lease. e Textbook and Media List of Accounts Attempts: 2 of 10 used (b) Your answer is correct. Discuss the nature of this lease to Sandhill. The nature of this lease to Sandhill is a sales-type lease. e Textbook and Media List of Accounts Your answer is correct. Prepare a lease amortization schedule for Teal Mountain for the 5-year lease term. (Round answers to 2 decimal places, e.g. 5,275.15.) TEAL MOUNTAIN COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Plus BPO Interest on Liability Reduction of Lease Liability Date 5/1/20 $ i $ i $ i $ 5/1/20 15852.19 i 15852.19 5/1/21 15852.19 5736.26 10115.93 5/1/22 15852.19 4623.51 11228.68 5/1/23 15852.19 3388.35 12463.84 5/1/24 15852.19 2017.33 13834.86 4/30/25 5000 495.49 4504.51 $ 84260.95 $ 16260.94 $ 68000.01 e Textbook and Media Assistance Used Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Teal Mountain's annual accounting period ends on December 31. Reversing entries are used by Teal Mountain. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Cred 5/1/20 Leased Equipment Lease Liability (To record the lease) 5/1/20 Lease Liability Cash (To record the first lease payment) 12/31/20 Interest Expense (To record interest expense) (To record amortization of the right-of-use asset) LO DODATNO DO DA UNE I (To record interest expense) (To record amortization of the right-of-use asset)
