Required 1: | ||||
present value of minimum lease payments (PVMLP) = $191,737 *14.13394 | ||||
present value of minimum lease payments (PVMLP) = $ 2,710,000 ( rounded) | ||||
here, present value of annuity n= 20 quarters i=4 % per quarter is 14.13394 | ||||
lessee and lessor must be satisfy Atleast one condition below : | ||||
1)is there is transfer title = NO | ||||
2) is there is bargain purchase option = No | ||||
3) is there lease term is grater than or equal to 75% useful life = yes , it is 100 % ( 5 / 5 years) | ||||
4)is there PVMLP is greater than or equal to 90 % of fair market value = yes , it is 100 % ( $ 2,710,000/$2,710,000) | ||||
both additional condition must be satisfy to lessor : | ||||
1) is there collectibility of lease payments is to be reasonably assured = Yes | ||||
2) is there no lessor costs yet to incurred = yes | ||||
for lessee: ( Mid south urologists group) | ||||
for lessee point of view , it is capital lease because lessor satisfy the 3rd and 4th condition | ||||
for lessor: (physicians leasing) | ||||
for lessor point of view, Direct financing lease- satisfy 3rd nad 4 th condition and also additional two conditions | ||||
that are lessor specific , so, it is a capital lease because cost and fair market value ( PVMLP) are equal | ||||
so, this is a direct financing lease. |
Required 2 :
Date | payments | interest (4%) | principal | Balance |
01-01-2021 | $ 2,710,000 | |||
01-01-2021 | $ 191,737 | $ 191,737 | $2,518,263 {2,710,000-191,737} | |
04-01-2021 | $ 191,737 | $100,731 {2,518,263*4%} | $ 91,006 | $2,427,257 {2,518,263 -91,006} |
Date | General journal | Debit | Credit |
for lessor: ( physiciansleasing ) | |||
01-01-2018 | Lease receivable | $ 2,710,000 | |
Equipment | $ 2,710,000 | ||
( to record lease receivable on leased asset ) | |||
01-01-2018 | Cash | $ 191,737 | |
Lease receivable | $ 191,737 | ||
( to record payment received ) | |||
04-01-2018 | Cash | $ 191,737 | |
Interest revenue | $100,731 | ||
Lease receivable | $ 91,006 | ||
( to record interest revenue and lease receivable ) | |||
for lessee (Mid south urologists group) | |||
01-01-2018 | Leased asset | $ 2,710,000 | |
Lease payable | $ 2,710,000 | ||
( to record lease payable on leased asset ) | |||
01-01-2018 | Lease payable | $ 191,737 | |
Cash | $ 191,737 | ||
( to record payment on leased asset) | |||
04-01-2018 | Lease payable | $ 91,006 | |
Interest expense | $100,731 | ||
Cash | $ 191,737 | ||
( to record interest expense and lease payable ) | |||
12/31/2018 | Depreciation expense | $ 542,000 | |
Accumulated depreciation | $ 542,000 | ||
( $2,710,000 / 5 years ) | |||
( to record depreciation expense ) |
required 3: | |||
This is a sales type lease for Randi medical because the cost of 2.3 million is | |||
not equal to the fair market value / PVMLP of $ 2,710,000 | |||
Date | General journal | Debit | Credit |
01-01-2018 | Lease receivable | $ 2,710,000 | |
Sales | $ 2,710,000 | ||
( to record sales ) | |||
01-01-2018 | Cost of goods sold | $ 2,300,000 | |
Equipment inventory | $ 2,300,000 | ||
( to record cost of goods sold ) | |||
01-01-2018 | Cash | $ 191,737 | |
Lease receivable | $ 191,737 | ||
( to record payment received ) | |||
04-01-2018 | Cash | $ 191,737 | |
Interest revenue | $100,731 | ||
Interest receivable | $ 91,006 | ||
( to record interest revenue and lease receivable ) |
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians'...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,920,000 and leased it to Mid-South Urologist Group, INC. On January 1, 2021. Lease Description Quarterly lease payments $115,119-beginning of each period Lease Term 5 years (20 quarters) No residual value; no purchase option Economics life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate 8% Fair value of asset $1,920,000 Required 1. How...
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Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $1,730,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. Evo 51. PV of S1, EVA of $1. PVA Of 51. EVAD of 51 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Lease Description: Quarterly lease payments $122,400-beginning of each period Lease term 5 years (20 quarters) No residual value; no...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $1,940,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (Ey of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) $116,318-beginning of each period 5 years (20 quarters) Lease Description: Quarterly lease payments Lease term No residual value;...
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Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians Leasing purchased a lithotripter from Rand for $2,020,000 and leased it to Mid-South Urologists Group, Inc., on January 1 2021 (FV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of Stand PVAD of S1) (Use appropriate factor(s) from the tables provided.) Lease Description Quarterly lease payments $131,821-beginning of each period 5 years (20 quarters) No residual value no purchase option...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,470,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) $148,095-beginning of each period 5 years (20 quarters) Lease Description: Quarterly lease payments Lease term No residual value;...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,260,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2021. (FV of $1, PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) $ 135,504-beginning of each period 5 years (20 quarters) Lease Description: Quarterly lease payments Lease term No residual...
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians" Leasing purchased a lithotripter from Rand for $1,900,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2018. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1 (Use appropriate fector(s) from the tables provided.) Lease Description: Quarterly lease payments Lease term No residual value; no purchase option Economic life of lithotripter Implicit...