Leased a color copier from lessor corporation at a

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Unformatted text preview: ption of the lease, and at each December 31 through 2054. The estimated useful life of the copier is seven years. At the end of the six-year lease term the copier is expected to be worth \$60,000. BB has guaranteed the residual value Lessor manufactured the copier at a cost of \$300,000. Lessor’s interest rate for financing the transaction is 10%. Chapter 15-98 Lessor Accounting for Guaranteed Residual Value Illustration (LESSOR) Calculation of the annual rental payment. Residual value PV of single sum (i=10%, n=6) PV of residual value Cost of equipment to be recovered Present value of residual value Amount to be recovered through lease payment PV factor of annunity due (i=10%, n=6) Annual payment required \$ 60,000 0.56447 \$ 33,868 x \$ 479,079 - (33,868) 445,211 4.79079 \$ 92,931 ÷ Chapter 15-99 Sales Type Lease Guaranteed Residual Value Because the cost of the asset is not equal to its fair value, the lease is classified as a Sales-Type Lease. Gross Receipts Net receipts Unearned Lease Income Sales Cost of Goods Sold (92,931 * 6 ) + \$60,000 (445,211) + (33,868) \$617,586 – 479,079 = PV of Minimum Lease Payments = Cost of Asset – PV (UGRV) = = = \$617,586 \$479,079 \$ 138,507 \$479,079 300,000 Chapter 15-100 Since the residual value is guaranteed by lessee, it is part of lease income Accounting by the Lessor Prepare an amortization schedule that would be suitable for the lessor. Date 1/1/50 1/1/50 12/31/50 12/31/51 12/31/52 12/31/53 12/31/54 12/31/54 Chapter 15-101 Lease Payment \$ 92,931 92,931 92,931 92,931 92,931 92,931 60,000 10% Interest Revenue Recovery of Receivable \$ 92,931 Lease Receivable \$ 479,079 386,148 331,832 272,084 206,361 134,067 54,542 0 38,615 33,183 27,208 20,636 13,407 5,458 54,316 59,748 65,723 72,295 79,524 * 54,542 * rounding Lessor Accounting for Guaranteed Residual Value GENERAL JOURNAL Date Description Debit Credit Jan 1 Lease receivable Cost of goods sold Sales revenue Inventory of equipment Cash Lease receivable 479,079 300,000 479,079 300,000 92,931 92,931 Chapter 15-102 How Does GRV affect Lessee? BB makes the following entries at inception of the lease. GENERAL JOURNAL Date Description Debit Credit Jan 1 Leased equipment Lease payable Lease payable Cash 479,079 479,079 92,931 92,931 Chapter 15-103 GRV is part of minimum lease payments How Does GRV affect Lessee? At December 31, 2050, BB prepares the following entry to recognize depreciation expense for the year. GENERAL JOURNAL Date Description Debit Credit Dec 31 Depreciation expense 69,847 Accumulated depreciation 69,847 479079 -60000 = 69,847 6 years Chapter 15-104 When Asset reverts to Lessor At December 31, 2054, Lessor records the reversion of Asset. GENERAL JOURNAL Date Description Debit Credit Dec 31 Equipment inventory Lease Receivable Interest Revenue 60,000 54,542 5,458 Chapter 15-105 When Asset reverts to Lessor at a Lower Value At December 31, 2054, Lessor records the reversion of Asset. Assume it was valued at \$10,000 GENERAL JOURNAL Date Description Debit Credit Dec 31 Equipment inventory Cash Lease Receivable Interest Revenue 10,000 50,000 54,542 5,458 Chapter 1...
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This note was uploaded on 04/08/2009 for the course ACG 3482C taught by Professor Tinaker during the Spring '09 term at University of Florida.

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