Question

Exercise 21A-7 b-e Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $94,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Carla Vista expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2017. Click here to view the factor table. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Date Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability 1/1/17 $ 12/31/17 12/31/18 12/31/19

Answer 1

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Leases Carl vista leased asset to Sharro e Corporation constitut "Finance lease the lessee bad on option to get title of the asset at the end of Fy which shows it is a Finance Lease " . Lease shall be - The asset under "Finance accounted al Fais value of asset. 1 Amortisation schedule A B Date Rent Receipt Interest, Roduction Receivable payment revenueſ in al liability - expense principals C Prev D-RB DpreuD- A+BO 1/1/17 94500 ? 36670 75602911065390 (94500X (94500-65390) 12/21/18 36670523131439 3395T (65 390X8) 65390 ) 12/31/19 36670 2719 33951 . (33951 X87) Fair value of machine 94500 (+) Present value @total factor @year 1-3 @94 32.5770 (7.08) + (108)) +(78.03)) Rent payment - 36670 3353

Vournal Entries in booke of Lessor ( Cal Vista) /19 Lease receivable arc Dx 345.00 - To roachine air 94500 Eto record leased asset given to Sheree cosposaled accounted at fais value] Journal Intries in books of lessee (Sherrer) 94500 gusto machine all Der To lease liability [To record asset at fais vale B purchased at lease from Carl Vista Journal entry in books of Sherrer Gif implicit cost of Carl Vista not knows) Fair value & Initial direct cost = Fair value 11/17 machine are of the Der 1065oo. 1 (94500 +12000). To lease liability [To, decord asset af fair value purchased 1 at lease from Card Vista] 106500