Question

On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified: a. Ten annual payments of $59,000 beginning January 1, 2018, the beginning of the lease and each December 31 thereafter through 2026. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $329,069. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $7,000 per year are specified, beginning January 1, 2018. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. e. A partial amortization schedule, appropriate for both the lessee and lessor, follows: (EV of $1. PV of $1. EVA of $1. PVA of $1, EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Decrease in Balance Outstanding Balance Payments Effective Interest (12% Outstanding balance) 329,069 277, 069 258, 317 237,315 1/1/2018 12/31/2018 12/31/2019 52,000 52,000 52,800 52,000 e.12 (277,069)- 33,248 e.12 (258,317)- 30,998 18,752 21,002 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2018 and December 31, 2018. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018. Complete this question by entering your answers in the tabs below.

Answer 1

Aniwer The leare is a finance leque as a life of leare covers than 7% unetul life of an asset more - Present Value of_Migmyn_? - leque Payments cost of_Equipment - Assets i Present Value of Milovo $ 52000 XE LC1.12) +1] beque (ayments : $ 52000 X 6.3282 = $_329068 Debit 11. Journal Entries for the lessee related to lease on January 1, 2018 and December 31, 2018, _Lessee Brand Services Iogle L particulars 2018 Tags Legited Equipment Alca o . 329068 - To lease Payable Al 329068 | CBeing asset leqsed for 10 years) | Jan. I lease payable Alt on 2000 Lmaintainance Expense Ale or 7000 To Carh Alc S9000 | Being flest leque_paymegt 794 maistul9a9.ce fees poid)

18452 Syooo Ilegre Pay gte Ale Interest Expenve Ale - Ox_ 33248_ Prepaid maig tinance Ale or 7000 To Gsh Ale | CBeing second leque payment made withinbewest_991 maintz1999 ce fees) Dec.3). Depreciation Acc (329066/logaus) 0.32907 - To Accumulated Depreciation - (eeing depreciation chaugel an lequel equipe 32907 Met 477976 1477976 Sant quy elit 1. Journal Enkies for the lessor related to lease on 201209dDecember 31, 2012 Lessor NRC Credit Corporation I Date I I particulars Debit 2011 Jan I lease Recelyable Ale Dr. [229068 Te Inventory_in Legse Equipment (Being asset keqsed for 10 years) 329 068 In. L 59000 3000 ash Alc. - To Maintainance Fees Rufable _Io leque feceupble Receivable | Being first leque paymegk zeceivel) S2000 Dec. 3 59000 Gsh Ale To leqse_Recenoble To _Inlevest Revenue to mailblaaque fes fuable Tuing second leqse Payment received 18952 33248 7000 4470581447068