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Question 28 On January 1, 2017, Wildhorse Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Wildhorse to make annual payments of $8,215 at the beginning of each year, starting January 1, 2017. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Wildhorse uses the straight-line method of depreciation for all of its plant assets. Wildhorse’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Click here to view factor tables

Compute the present value of the minimum lease payments. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The present value of the minimum lease payments $enter the present value of the minimum lease payments rounded to 0 decimal places

Prepare all necessary journal entries for Wildhorse for this lease through January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.) Date Account Titles and Explanation Debit Credit choose a transaction date 1/1/1712/31/171/1/18 enter an account title to record the lease enter a debit amount enter a credit amount enter an account title to record the lease enter a debit amount enter a credit amount (To record the lease.) enter an account title to record the first payment enter a debit amount enter a credit amount enter an account title to record the first payment enter a debit amount enter a credit amount (To record first payment.) choose a transaction date 1/1/1712/31/171/1/18 enter an account title to record depreciation enter a debit amount enter a credit amount enter an account title to record depreciation enter a debit amount enter a credit amount (To record depreciation.) enter an account title to record interest enter a debit amount enter a credit amount enter an account title to record interest enter a debit amount enter a credit amount (To record interest.) 1/1/18 enter an account title to record second payment on January 1, 2018 enter a debit amount enter a credit amount enter an account title to record second payment on January 1, 2018 enter a debit amount enter a credit amount enter an account title to record second payment on January 1, 2018 enter a debit amount enter a credit amount (To record second payament.)

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Answer 1

Answert a) Caleulation of the present value of the minimum lease payment present vake of Minimum lease payment = Annual payment * present value of annuity factor (102,5), - $8,015*(1+07-0+107.5565-10 10% = $8,215 x 4.16986 = $34,255 1. present value of Minimum lease payment = $ 34,255 b) Journal entries particulars - El Debit credit 2017 Leased equipment Ale DY $34,955 Dale Jani - To Lease |$34,255 $8,215 $8,215 Lease 2 Dr To cash Dec-31 Depreciation expeuse Ale DY To Accumulated Depreciation - Capital leaseſ $34255767 $6.851 $6.851 DY $2,604 $2,604 2018 Interest expense Ale cho Interest payable ($ 34,255-8,215)x102] Lease liability Ale Interest payable Ale To cash or or $5.611 $2,604 $ 8,915