Larkspur Company, a machinery dealer, leased a machine to Dexter
Corporation on January 1, 2017. The lease is for an 8-year period
and requires equal annual payments of $32,912 at the beginning of
each year. The first payment is received on January 1, 2017.
Larkspur had purchased the machine during 2016 for $152,000.
Collectibility of lease payments is reasonably predictable, and no
important uncertainties surround the amount of costs yet to be
incurred by Larkspur. Larkspur set the annual rental to ensure an
11% rate of return. The machine has an economic life of 10 years
with no residual value and reverts to Larkspur at the termination
of the lease.
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Compute the amount of the lease receivable. (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 amount of the lease receivable |
$enter the amount of the lease receivable rounded to 0 decimal places |
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List of Accounts
Prepare all necessary journal entries for Larkspur for 2017. (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 |
---|---|---|---|
1/1/17 |
enter an account title to record the lease on January 1, 2017 |
enter a debit amount |
enter a credit amount |
enter an account title to record the lease on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the lease on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the lease on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
(To record the lease.) |
|||
enter an account title to record the first lease payment on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the first lease payment on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
(To record the first lease payment.) |
|||
12/31/17 |
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
enter an account title to record the transaction on December 31, 2017 |
enter a debit amount |
enter a credit amount |
ANSWER
a) | |||
Amount of Lease Receivables = $32,912 x PVOAD(11%,8) | $ 187,999.93 | ||
b) | |||
Prepare all necessary journal entries for Headland for 2017. |
|||
Date | Account Titles & Explanations | Debit | Credit |
01/01/17 | Lease Receivable | $ 187,999.93 | |
Cost of Goods Sold | $ 152,000.00 | ||
Sales Revenue | $ 187,999.93 | ||
Inventory | $ 152,000.00 | ||
01/01/17 | |||
Cash | $ 32,912.00 | ||
Lease Receivable | $32,912.00 | ||
31/12/17 | Interest Receivable (187,999.93- 32,912.00 ) x 11% | $ 17,059.67 | |
Interest Revenue | $ 17,059.67 |
_____________________________________________
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Larkspur Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The...
Larkspur Company, a machinery dealer, leased a machine to Dexter
Corporation on January 1, 2017. The lease is for an 8-year period
and requires equal annual payments of $32,912 at the beginning of
each year. The first payment is received on January 1, 2017.
Larkspur had purchased the machine during 2016 for $152,000.
Collectibility of lease payments is reasonably predictable, and no
important uncertainties surround the amount of costs yet to be
incurred by Larkspur. Larkspur set the annual rental...
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