View Policies Show Attempt History Current Attempt in Progress Sunland Dairy leases its milking equipment from Coronado Finance Company under the following lease terms. 1. The lease term is 10 years, noncancelable, and requires equal rental payments of $30,700 due at the beginning of each year starting January 1, 2020. 2. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $231,790 and a cost of $263,000 on Coronado Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $13,300, though Sunland Dairy has guaranteed a residual value of $20,100 to Coronado Finance. 3. The lease contains no renewal options, and the equipment reverts to Coronado Finance upon termination of the lease. The equipment is not of a specialized use. 4. Sunland Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Sunland Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable. Click here to view factor tables. Your answer is partially correct. Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31, 2020 (the lessee's and lessor's year- end). Assume no reversing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and final answers to 0 decimal places, e.g. 5,250.) Date Account Titles and Explanation Debit Credit Lessee: Jan 1, 2020 Leased Equipment 427986 Lease Liability (To record the lease.) Jan. 1.2020 Lease Liability 62100 Cash (To record lease payment.) (To record lease payment.) Lessor: Jan 1, 2020 Lease Receivable 427986 Equipment Cash 62100 Lease Receivable (To record the lease.) Dec. 31, 2020 Cash 62100 Lease Receivable (To record lease payment.) Lessee: Dec. 31, 2020 Interest Expense 36589 Lease Receivable (To record lease payment.) Lessee: Dec 31, 2020 Interest Expense 36589 Interest Payable (To record interest.) Dec 31, 2020 Depreciation Expense 40659 Accumulated Depreciation-Capital Leases (To record amortization.) Lessor: Dec 31, 2020 Interest Receivable 36589 Interest Revenue What would have been the amount of the initial lease liability recorded by the lessee upon the commencement of the lease if: (Round answers to 0 decimal places, e.g. 5,250.) (1) The residual value of $20,100 had been guaranteed by a third party, not the lessee? $ 419735 (2) The residual value of $20,100 had not been guaranteed at all? $ 427986 e Textbook and Media List of Accounts X Your answer is incorrect. On the lessor's books, what would be the amount recorded as the lease receivable at the commencement of the lease, assuming: (Round answers to 0 decimal places, e.g. 5,250.) (1) The residual value of $20,100 had been guaranteed by a third party? $ 42799 (2) The residual value of $20,100 had not been guaranteed at all? $ 111008 View Policies Show Attempt History Current Attempt in Progress Sunland Dairy leases its milking equipment from Coronado Finance Company under the following lease terms. 1. The lease term is 10 years, noncancelable, and requires equal rental payments of $30,700 due at the beginning of each year starting January 1, 2020. 2. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $231,790 and a cost of $263,000 on Coronado Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $13,300, though Sunland Dairy has guaranteed a residual value of $20,100 to Coronado Finance. 3. The lease contains no renewal options, and the equipment reverts to Coronado Finance upon termination of the lease. The equipment is not of a specialized use. 4. Sunland Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Sunland Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable. Click here to view factor tables. Your answer is partially correct. Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31, 2020 (the lessee's and lessor's year- end). Assume no reversing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and final answers to 0 decimal places, e.g. 5,250.) Date Account Titles and Explanation Debit Credit Lessee: Jan 1, 2020 Leased Equipment 427986 Lease Liability (To record the lease.) Jan. 1.2020 Lease Liability 62100 Cash (To record lease payment.) (To record lease payment.) Lessor: Jan 1, 2020 Lease Receivable 427986 Equipment Cash 62100 Lease Receivable (To record the lease.) Dec. 31, 2020 Cash 62100 Lease Receivable (To record lease payment.) Lessee: Dec. 31, 2020 Interest Expense 36589 Lease Receivable (To record lease payment.) Lessee: Dec 31, 2020 Interest Expense 36589 Interest Payable (To record interest.) Dec 31, 2020 Depreciation Expense 40659 Accumulated Depreciation-Capital Leases (To record amortization.) Lessor: Dec 31, 2020 Interest Receivable 36589 Interest Revenue What would have been the amount of the initial lease liability recorded by the lessee upon the commencement of the lease if: (Round answers to 0 decimal places, e.g. 5,250.) (1) The residual value of $20,100 had been guaranteed by a third party, not the lessee? $ 419735 (2) The residual value of $20,100 had not been guaranteed at all? $ 427986 e Textbook and Media List of Accounts X Your answer is incorrect. On the lessor's books, what would be the amount recorded as the lease receivable at the commencement of the lease, assuming: (Round answers to 0 decimal places, e.g. 5,250.) (1) The residual value of $20,100 had been guaranteed by a third party? $ 42799 (2) The residual value of $20,100 had not been guaranteed at all? $ 111008