Question

Exercise 21A-5 a-c Marin Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. The cost of the asset to the lessor is $240,000. The fair value of the asset at January 1, 2017, is $240,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $24,323, none of which is guaranteed. The agreement requires equal annual rental payments, beginning on January 1, 2017. Collectibility of the lease payments by Marin is probable. Click here to view the factor table. Assuming the lessor desires a 9% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to 0 decimal places e.g. 5,275.) Amount of the annual rental payment SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT
Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Leased Building
Accumulated Depreciation-Capital Leases
Accumulated Depreciation-Equipment
Accumulated Depreciation-Leased Equipment
Accumulated Depreciation-Leased Machinery
Accumulated Depreciation-Machinery
Advertising Expense
Amortization Expense
Airplanes
Buildings
Cash
Cost of Goods Sold
Deferred Gross Profit
Deposit Liability
Depreciation Expense
Equipment
Executory Costs
Executory Costs Payable
Gain on Disposal of Equipment
Gain on Disposal of Plant Assets
Gain on Lease
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Land
Leased Asset
Leased Buildings
Leased Equipment
Lease Expense
Leased Land
Lease Liability
Lease Receivable
Lease Revenue
Legal Expense
Loss on Capital Lease
Machinery
Maintenance and Repairs Expense
Notes Payable
Prepaid Lease Executory Costs
Prepaid Legal Fees
Property Tax Expense
Property Tax Payable
Rent Expense
Rent Payable
Rent Receivable
Rent Revenue
Revenue from Sale-Leaseback
Right-of-Use Asset
Salaries and Wages Expense
Sales Revenue
Selling Expenses
Trucks
Unearned Profit on Sale-Leaseback
Unearned Lease Revenue
Unearned Service Revenue

Answer 1

1. Annual lease payment = 46117

Cost of the asset	240,000
Less: Present value of unguaranteed residual value [24,323 * PVF(9%,6 years)]	14503.07521
Total cost to be recovered	225,497
Total cost to be recovered	225,497
PVADF (9%, 6years)	4.88965
Annual Lease payment	46117

2.   

Date	Annual lease payment plus URV	Interest on lease receivable	Recovery of lease receivable	Lease receivable
1/1/17				240,000
1/1/17	46117	0	46117	193,883
1/1/18	46117	17449	28668	165,215
1/1/19	46117	14869	31248	133,967
1/1/20	46117	12057	34060	99,907
1/1/21	46117	8992	37125	62,782
1/1/22	46117	5650	40467	22,315
12/31/22	24323	2008	22315	0
	301025	61025	240000

3.

Date	Account Titles	Debit	Credit
1/1/17	Lease receivable	240,000
	Cost of goods sold	240,000
	Sales revenue		240,000
	Inventory		240,000
1/1/17	Cash	46117
	Lease receivable		46117
12/31/17	Lease receivable	17449
	Interest revenue		17449
1/1/18	Cash	46117
	Lease receivable		46117
12/31/18	Lease receivable	14869
	Interest revenue		14869