Question

signment Gradebook ORION Downloadable eTextbook CALCULATOR FULL SCREEN On January 1, 2017 Indigo Animation sold a truck to Peete Finance for $44,000 and immediately leased it back. The truck was carried on Indigo's books at $37,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Indigo at lease end. The lease requires three equal rental payments of $13,000 at the end of each year (first payment on January 1, 2018). The appropriate rate of interest is 6%, the truck has a useful life of 5 years, and the residual value at the end of the lease term is expected to be $14,000, none of which is guaranteed. UNTER VERSION BACK Prepare Indigo's 2017 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not inden manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to o decimal places, .0.5.26.5.) Click here to view the factor table Date Account Titles and Explanation Debat 1/1/17 Cash I Trucks Gain on Disposal of Plant Assets (To record sale of truck) 1/1/17 right of Use Asset (To record lease 12/31/17 Lease Boese AM

Answer 1

Annual Rental Payment P.V of an annuity for n=3&1 = 3% P.V of rental payments 13000 2.67301 34749 Amortization Schedule Annual Lease expense Year Interest @6% on outstanding Balance (Col. 3) | Reduction in Balance (Col. 2-Col.3) Outstanding Baland 34,749 23,834 13,000 2,085 10,915 Debit Credit 44000 Date Account Ttle and Explanation 1/1/2017 Cash Trucks Gain on disposal of Plant Assets (To record sale of Truck) 37000 7000 34,749 1/1/2017 Right -of use Asset Lease Liability (To record lease liability) 34,749 13,000 61 12/31/2017 Lease expense Lease Liability Right of use Assets 2,085 10,915 62