Question

CALCULATOR Exercise 21-4 Vaughn Leasing Company signs a lease agreement on January 1, 2017, to lease electronic equipment to Bramble Company. The term of the noncancelable case is 2 years, and payments are required at the end of each year. The following information relates to this agreement: 1. Bramble Company has the option to purchase the equipment for $17300 upon termination of the lease 2. The equipment has a cost and fair value of $170,000 to Vaughn Leasing Company. The s economic life is 2 years, with a salvage value of $17,300. 3. Bramble Company is required to pay $4.800 each year to the lessor for executory costs 4 Vaughn Leasing Company desires to earn a return of 10% on its investment 5. Collectibility of the payment is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lesson Click here to view factor tables are (a) Prepare the journal entries on the book of Vaughn Leasing to reflect the payments received under the lease and to recognire income for the year 2017 and 2018. (Credit account s automatically indented when amount is entered. Do not inden manly. If no entry is required, select Wory for the accountitles and enter for the amounts Round present value factor calculations to decimal places, 0.527552 and the final answer to decimal places .25.) Date Accounts and explanation

Answer 1

Year	PV Factor @ 10%
1	0.90909
2	0.82645
Total	1.73554

Present Value of Lease
Cost (Fair Value) of leased asset	$                    170,000
Less: Present value of salvage value (17300*0.82645)	$                      14,298
Present value of annual payments	$                    155,702
Divided by: PV Annuity Factor @ 10% for 2 Years	1.73554
Amount of Lease payment (exclude executory costs)	$                      89,714
Amount of Lease payment (With executory costs) (89714+4800)	$                      94,514

Vaughn Leasing Company (Lessor)
Lease Amortization Schedule
Date	Annual Lease Payment (exclude executory costs)	Interest on Lease Receivable	Recovery of Lease Receivable	Balance of Lease Receivable
Jan 1, 2017				$        170,000
Dec 31, 2017	$                      89,714	$           17,000	$        72,714	$          97,286
Dec 31, 2018	$                      89,714	$             9,729	$        79,986	$          17,300
Interest on Lease Receivable = Beginning Balance of Lease Receivable * 10%
Recovery of Lease Receivable = Annual Lease Payment (exclude executory costs) - Interest on Lease Receivable
Balance of Lease Receivable = Beginning Balance of Lease Receivable - Recovery of Lease Receivable

Vaughn Leasing Company (Lessor)
Date	General Journal	Debit	Credit
Jan 1, 2017	Lease Receivable	$        170,000
	Equipment		$     170,000
	(To record the lease.)
Dec 31, 2017	Cash	$           94,514
	Executory Costs Payable		$          4,800
	Interest Revenue		$        17,000
	Lease Receivable		$        72,714
	(To record Lease payment received.)
Dec 31, 2018	Cash	$           94,514
	Executory Costs Payable		$          4,800
	Interest Revenue		$          9,729
	Lease Receivable		$        79,986
	(To record Lease payment received.)
Date	General Journal	Debit	Credit
Dec 31, 2018	Cash	$           17,300
	Lease Receivable		$        17,300
	(To record to purchase option exercises by Lessee.)