Question

Exercise 2 -11 ad The following facts pertanto a non-cancelable lease agreement between Kingbird Leasing Company and Blossom Company, a lessee May 1, 2017 Annual lease payment due at the beginning of each year, begening with May 1, 2017 Bargain purchase option price at end of lease term Lease term From We of leased e ment Lessor's cost Fair value of asset at May 1, 2017 Lesson's lite Lessee's incremental borrowing rate $17,225,30 $4.000 5 years 10 years $55,000 $27,000 8 The collectibility of the lease payments by Kingbed is probable Click here to view the fact table B a wer orect. Try again Compute the amount of the lease recebe a commencement of the base (For calculation purposes, we decapaces as provided and reanswer to decal plane 25.) played in the set commencement P o che forged for the years to capt 12 su S/1/18 S 4302 hermes and record the and . h a nd on the Type here to search

Answer 1

Annual lease payments $ 17,225 1+ PVA(8%, 4 years) 4.31213 PV of annual Lease Payments 74,278 (17225.30*4.31213) $ Bargain purchase option 4,000 PVI (8%, 5 years) 0.68058 PV of purchase option 2,722 (4000*0.68058) Lease Receivable at commencement 77,000 (74278+2722) Lease Ammortization Schedule Principle Closing Installment Opening Principle Interest at 8% Quarter Principle $ Adjustment amount Recognition 77,000 $ 17,225.30 $ $ 01-May-17 77,000.00 $ 17,225.30 $ 59,774.70 01-May-18 $ 4,781.98 12,443.32 $ 3,786.51 $13,438.79 $ 2,711.41 14,513.89 $ 1,550.30 15,675.00 $ 296.30 $ 3,703.70 $ 59,774.70 $ 17,225.30 $ 47,331.38 01-May-19 $ 17,225.30 $ 47,331.38 $ 33,892.59 $ 33,892.59 $ 19,378.70 $ 01-May-20 17,225.30 $ 19,378.70 $ 01-May-21 17,225.30 $ 3,703.70 $ 30-Jun-22 3,703.70 $ 4,000.00 $

Accounts and Explanantions Debit Credit Date 01-May-17 Lease Receivable Cost of Goods sold Sales Revenue Inventory (To record the lease) $ 77,000.00 $ 55,000.00 77,000.00 55,000.00 01-May-17 Cash $ 17,225.30 Lease Receivable 17,225.30 (To record receipt of lease rentals) 31-Dec-17 Lease Receivable $ 3,187.98 Interest Revenue (59774.70*8%*8/ 12 ) (To record lease interest income accrued) $ 3,187.98 $ 01-May-18 Cash 17,225.30 Lease Receivable Interest Revenue (59774.70*8%*4/12 ) (To record receipt of lease rentals) 15,631.31 1,593.99 31-Dec-18 Lease Receivable $ 2,524.34 Interest Revenue (47331.38*8%*8/ 12 ) (To record lease interest income accrued) 2,524.34