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Copy of Ch15

# Copy of Ch15 - Student Name Class Problem 15-08 RHONE-METRO...

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Student Name: Class: Problem 15-08 RHONE-METRO INDUSTRIES Annual Rental Payments Requirement 1: Lessor's Calculation of Rental Payments Amount to be recovered (fair market value) \$365,760 Less: Present value of the guaranteed residual value 17,075 Amount to be recovered through periodic rental payments \$348,685 Rental payment at the beginning of each of four years \$100,000 Correct! Requirement 2: Present Value of Minimum Lease Payments Present value of periodic rental payments \$348,685 Plus: Present value of the lessee-guaranteed residual value 17,075 Present value of minimum lease payments \$365,760 Correct! (a) By Western Soya Co. (the lessee) Classified as a capital lease because the present value of the equipment is greater than 90% of the fair value. (b) By Rhone-Metro (the lessor) Classified as a Direct Financing Lease because no profit is being made off of the sale of the lease. Requirement 3: Journal entries on December 31, 2009 General Journal Account Debit Credit Western Soya Co. (Lessee) Leased equipment 365,760 Lease payable 365,760 Lease payable 100,000 Cash 100,000 Rhone-Metro (Lessor) Lease receivable 365,760 Inventory of equipment 365,760 Cash 100,000 Lease receivable 100,000

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Requirement 4: Lease Amortization Schedule Effective Dec. Interest Decrease Outstanding 31 Payments 10% in Balance Balance 2009 365,760 2009 100,000 100,000 265,760 2010 100,000 26,576 73,424 192,336 2011 100,000 19,234 80,766 111,570 2012 100,000 11,157 88,843 22,727 2013 25,000 2,273 22,727 0 425,000 59,240 365,760 Correct! Correct! Correct! Requirement 5: Journal entries on December 31, 2010 General Journal Account Debit Credit Western Soya Co. (Lessee) Interest expense 26,576 Lease payable 73,424 Cash 100,000 Depreciation expense 85,190 Accumulated depreciation 85,190 Rhone-Metro (Lessor) Cash 100,000 Lease receivable 73,424 Interest revenue 26,576 Requirement 6: Journal entries on December 31, 2013 General Journal Account Debit Credit Western Soya Co. (Lessee) Depreciation expense 85,190 Accumulated depreciation 85,190 Interest expense 2,273 Lease payable 22,727 Accumulated depreciation 340,760 Loss on residual value guarantee 23,500 Leased equipment 365,760 Cash 23,500 Rhone-Metro (Lessor) Inventory of equipment 1,500 Cash 23,500 Lease receivable 22,727 Interest revenue 2,273
Given Data P15-08: RHONE-METRO INDUSTRIES Lease length 4 years

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Copy of Ch15 - Student Name Class Problem 15-08 RHONE-METRO...

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