Exercise 21-05
Morgan Leasing Company signs an agreement on January 1, 2020, tolease equipment to Cole Company. The following information relatesto this agreement.
| 1. | | The term of the non-cancelable lease is 6 years with no renewaloption. The equipment has an estimated economic life of 6years. |
| 2. | | The cost of the asset to the lessor is $245,000. The fair valueof the asset at January 1, 2020, is $245,000. |
| 3. | | The asset will revert to the lessor at the end of the leaseterm, at which time the asset is expected to have a residual valueof $24,335, none of which is guaranteed. |
| 4. | | The agreement requires equal annual rental payments, beginningon January 1, 2020. |
| 5. | | Collectibility of the lease payments by Morgan isprobable. |
1.) Assuming the lessor desires a 8% rate of return on itsinvestment, calculate the amount of the annual rental paymentrequired
2.)
Prepare an amortization schedule that is suitable for thelessor for the lease term. (Round answers to 0 decimalplaces e.g. 5,275.)
MORGAN LEASING COMPANY (Lessor)
Lease Amortization Schedule |
|---|
Date | | Annual Lease Payment Plus
URV | | Interest on Lease
Receivable | | Recovery of Lease
Receivable | | Lease Receivable |
|---|
1/1/20 | | $enter a dollar amount | | $enter a dollar amount | | $enter a dollar amount | | $enter a dollar amount |
|---|
1/1/20 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
1/1/21 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
1/1/22 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
1/1/23 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
1/1/24 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
1/1/25 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
12/31/25 | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount | | enter a dollar amount |
|---|
| | $enter a total amount for this column | | $enter a total amount for this column | | $enter a total amount for this column | |
|
|
|
|
|
3.) Prepare all of the journal entries for the lessor for 2020and 2021 to record the lease agreement, the receipt of leasepayments, and the recognition of revenue. Assume the lessor’sannual accounting period ends on December 31, and it does not usereversing entries
Date | Account Titles and Explanation | Debit | Credit |
|---|
1/1/2012/31/201/1/2112/31/21 |
| enter an account title To record the lease on January 12017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title To record the lease on January 12017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title To record the lease on January 12017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title To record the lease on January 12017 | enter a debit amount | enter a credit amount |
|---|
| (To record the lease) | | |
1/1/2012/31/201/1/2112/31/21 | enter an account title To record the receipt of lease paymenton January 1 2017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title To record the receipt of lease paymenton January 1 2017 | enter a debit amount | enter a credit amount |
|---|
| (To record the receipt of lease payment) | | |
1/1/2012/31/201/1/2112/31/21 | enter an account title for the journal entry on December 312017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title for the journal entry on December 312017 | enter a debit amount | enter a credit amount |
|---|
1/1/2012/31/201/1/2112/31/21 | enter an account title for the journal entry on January 12018 | enter a debit amount | enter a credit amount |
|---|
| enter an account title for the journal entry on January 12018 | enter a debit amount | enter a credit amount |
|---|
1/1/2012/31/201/1/2112/31/21 | enter an account title for the journal entry on December 312017 | enter a debit amount | enter a credit amount |
|---|
| enter an account title for the journal entry on December 312017 | enter a debit amount | enter a credit amount |
|---|
