Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 25 Sep 2017 My Price 6.00

Faldo Leasing Company and Vance Company

(Lessee Entries with Residual Value) The following facts pertain to a no cancelable lease agreement between Faldo Leasing Company and Vance Company, a lessee.

Inception date

January 1, 2012

Annual lease payment due at the beginning of each year, beginning with January 1, 2012

$124,798

Residual value of equipment at end of lease term, guaranteed by the lessee

$50,000

Lease term

6 years

Economic life of leased equipment

6 years

Fair value of asset at January 1, 2012

$600,000

Lessor’s implicit rate

12%

Lessee’s incremental borrowing rate

12%

The lessee assumes responsibility for all executory costs, which are expected to amount to $5,000 per year. The asset will revert to the lessor at the end of the lease term. The lessee has guaranteed the lessor a residual value of $50,000. The lessee uses the straight-line depreciation method for all equipment.

Instructions

(Round all numbers to the nearest cent.)

(a) Prepare an amortization schedule that would be suitable for the lessee for the lease term.

(b) Prepare the entire journal entries for the lessee for 2012 and 2013 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31 and reversing entries are used when appropriate.

Answers

Maurice Tutor
(5)
Status NEW Posted 25 Sep 2017 06:09 PM My Price 6.00

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