Question

4 On January 1, 2021, Allied Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Allied. The equipment cost Allied $976,000 and has an expected useful life of five years. Allied expects the residual value at December 31, 2024, will be $320,000. Negotiations led to the lessee guaranteeing a $380,000 residual value. 10 points Equal payments under the finance/sales-type lease are $220,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Karrier is aware that Allied used a 7% interest rate when calculating lease payments. (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.) Required: 1. Prepare the appropriate entries for both Karrier and Allied on January 1, 2021, to record the lease. 2. Prepare all appropriate entries for both Karrier and Allied on December 31, 2021, related to the lease. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for both Karrier and Allied on January 1, 2021, to record the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar.) No Debit Credit 1 Date General Journal January 01, 2021 Right-of-use asset Lease payable ✓ 829,471 X 829,471 2 ✓ 1,025,362 X 976,000 January 01, 2021 Lease receivable Cost of goods sold Equipment Sales revenue 976,000 1,025,362 < Required 1 Required 2 >

Answer 1

All the working is in images attached.

Date Page i. Pv lease of 밥 payments for lessee . Pv of periodic lease payments + Pv of lease guaranteed susidual value [220000_x_1-617% 1-(17137 excess 380000 - 300000) ** (1477 (2200004_3.387] + [60000 X 0.7628) 745140+ 45773 $ 790913 pv for lesson RV + of 왕 lease , payments for pu of pesiódic lease payments & Prof Prof excess lease GRU 790913 + 320000xd {1+772) 790913 + (320000* 17628) 790913 + 244096 $ 1035009 ។

Date Page lise .. aset Right of lease payable $790923 $790913 Lease Receivable $_1035009 COGS $ 976000 Equipment sales Revenue $976000 $1035007 692 on Dec 31, 2021 Interest expense 790913_4_77 $55,364 Amortisation expenses 790913 4 years $ 197,728 Interest revenue a 1035009x7% $ 72,450 Entries: Int expense lease payable Cash $55,364 $164,636 $220,000 Amort expense Right of $ 197,728 $197728 use asset Cash $ 220,000 gnt revenue $ 72,450 lease receivable , $ 141,550

S. No.	Date	General Journal	Debit	Credit
1	Jan 1, 21	Right of use asset	790,913
		Lease Payable		790,913
2	Jan 1, 21	Lease Receivable	1,035,009
		COGS	976,000
		Equipment		976,000
		Sales Revenue		1,035,009

S. No.	Date	General Journal	Debit	Credit
1	Dec 31, 21	Interest expense	55,364
		Lease Payable	164,636
		Cash		220,000
2	Dec 31, 21	Amortisation expense	197,728
		Right of use asset		197,728
3	Dec 31, 21	Cash	220,000
		Interest Revenue		72,450
		Lease rev=ceivable		147,550