Answer -
Step - (1) - Calculation of Annual Lease Payments -
Particulars | Explanation | ||
I. | Fair value of leased asset | Given in question | $175000 |
II. | Present Value of salvage value of leased asset |
Salvage value * PVIF of $1 (i%, n) = $14900 * $1(8%,2 years) = $14900 * 0.85734 = $12774 |
$12774 |
III. | Present Value of annual lease payments | I - II | $162226 |
IV. | Lease term | Given in question | 2 years |
Annual Lease Payments | III / IV | $81113 | |
.
Step - (2) -
Journal of Vaughn Leasing Company
Date | Account Titles and Explanation | Debit ($) | Credit ($) |
1/1/17 |
Lease Receivable Equipment |
175000 - |
- 175000 |
12/31/17 |
Cash Executory Costs Payable [given in question] Interest Revenue [$175000 * 8%] Lease Receivables [$81113 - $14000] |
85813 - - - |
- 4700 14000 67113 |
12/31/18 |
Cash Executory Costs Payable [given in question] Interest Revenue [($175000 - $67113) * 8%] Lease Receivables [$81113 - $8631] |
85813 - - - |
- 4700 8631 72482 |
Exercise 21-4 Your answer is partially correct. Try again. Vaughn Leasing Company signs a lease agreement...
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