90.2K

Verified Solution

Link Copied!

Exercise 21-9 The following facts pertain to a noncancelable lease agreement between Pronghorn Leasing Company and Stellar Company, a lessee. May 1, 2017 Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $20,253.44 $4,100 5 years 10 years $66,000 $87,000 10 % 10 % The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. Click here to view factor tables Your answer is correct. Compute the amount of the lease receivable at the inception of the lease. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 16.25.) Lease receivable at inception J 86,999.78 Your answer is partially correct. Try again. Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2017, 2018, and 2019. The lessor's accounting period ends on December 31. Reversing entries are not used by Pronghorn. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 16.25.) Date Account Titles and Explanation Debit Credit 5/1/17 Lease Receivable 86,999.78 Cost of Goods Sold 66000.22 Sales Revenue 87,000 T Inventory 66,000 (To record the lease.) Tcash 20,253.44 2 Lease Receivable 20,253.44 (To record lease payment. ) Exercise 21-9 The following facts pertain to a noncancelable lease agreement between Pronghorn Leasing Company and Stellar Company, a lessee. May 1, 2017 Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term Lease term Economic life of leased equipment Lessor's cost Fair value of asset at May 1, 2017 Lessor's implicit rate Lessee's incremental borrowing rate $20,253.44 $4,100 5 years 10 years $66,000 $87,000 10 % 10 % The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. Click here to view factor tables Your answer is correct. Compute the amount of the lease receivable at the inception of the lease. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 16.25.) Lease receivable at inception J 86,999.78 Your answer is partially correct. Try again. Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2017, 2018, and 2019. The lessor's accounting period ends on December 31. Reversing entries are not used by Pronghorn. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 16.25.) Date Account Titles and Explanation Debit Credit 5/1/17 Lease Receivable 86,999.78 Cost of Goods Sold 66000.22 Sales Revenue 87,000 T Inventory 66,000 (To record the lease.) Tcash 20,253.44 2 Lease Receivable 20,253.44 (To record lease payment. )

Answer & Explanation Solved by verified expert

See Answer