On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified: a. Ten annual payments of $59,000 beginning January 1, 2018, the beginning of the lease and each December 31 thereafter through 2026. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $329,069. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $7,000 per year are specified, beginning January 1, 2018. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. e. A partial amortization schedule, appropriate for both the lessee and lessor, follows: (EV of $1. PV of $1. EVA of $1. PVA of $1, EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Decrease in Balance Outstanding Balance Payments Effective Interest (12% Outstanding balance) 329,069 277, 069 258, 317 237,315 1/1/2018 12/31/2018 12/31/2019 52,000 52,000 52,800 52,000 e.12 (277,069)- 33,248 e.12 (258,317)- 30,998 18,752 21,002 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2018 and December 31, 2018. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018. Complete this question by entering your answers in the tabs below. Prepare the appropriate entries for the lessee related to the lease on January 1, 2018 and December 31, 2018. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 2 Record lease by lessee. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018 Record entry Clear entry View general journal Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 Record lease by lessor (include maintenance fee accrual). Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2018 Record entry Clear entry View general journal
