Chap015 - Student Name Instructor Class McGraw-Hill/Irwin...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Student Name: Instructor Class: McGraw-Hill/Irwin Problem 15-08 RHONE-METRO INDUSTRIES Annual Lease Payments Requirement 1: Lessor's Calculation of Lease Payments Amount to be recovered (fair value) $ 365,760 Less: Present value of the guaranteed residual value (17,075) Amount to be recovered through periodic lease payments $ 348,685 Lease payment at the beginning of each of four years $ 100,000 Correct! Requirement 2: Present Value of Minimum Lease Payments Present value of periodic Lease 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) Since at least one criterion is met, this is a capital lease to the lessee. Western Soya records the present value of minimum lease payments as a leased asset and a lease liability. (b) By Rhone-Metro (the lessor) Since the fair value equals the lessor's carrying value, there is no dealer's profit, making this a direct financing lease. Requirement 3: Journal entries on December 31, 2011 General Journal Account Debit Credit Western Soya Co. (Lessee) Leased equipment 365,760 Lease payable 365,760 «- Correct! Lease payable 100,000 Cash 100,000 «- Correct! Rhone-Metro (Lessor) Lease receivable 365,760 Inventory of equipment 365,760 «- Correct! Cash 100,000 Lease receivable 100,000 «- Correct!
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Student Name: Instructor Class: McGraw-Hill/Irwin Problem 15-08 Requirement 4: Lease Amortization Schedule Effective Dec. Interest Decrease Outstanding 31 Payments 10% in Balance Balance 2011 365,760 2011 100,000 100,000 265,760 2012 100,000 26,576 73,424 192,336 2013 100,000 19,234 80,766 111,570 2014 100,000 11,157 88,843 22,727 2015 25,000 2,273 22,727 - 425,000 59,240 365,760 Correct! Correct! Correct! Requirement 5: Journal entries on December 31, 2012 General Journal Account Debit Credit Western Soya Co. (Lessee) Interest expense 26,576 Lease payable 73,424 Cash 100,000 «- Correct! Depreciation expense 85,190 Accumulated depreciation 85,190 «- Correct! Rhone-Metro (Lessor) Cash 100,000 «- Correct! Lease receivable 73,424 Interest revenue 26,576 Requirement 6: Journal entries on December 31, 2015 General Journal Account Debit Credit Western Soya Co. (Lessee) Depreciation expense 85,190 Accumulated depreciation 85,190 «- Correct! 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 «- Correct! Rhone-Metro (Lessor) Inventory of equipment 1,500 Cash 23,500 Lease receivable 22,727 Interest revenue 2,273 «- Correct!
Image of page 2
Given Data P15-08: RHONE-METRO INDUSTRIES Lease length 4 years Equipment cost $ 365,760 Expected useful life 6 years Lessee-guaranteed residual value $ 25,000 Lease payments $ 100,000 Incremental borrowing rate 12% Implicit interest rate 10%
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Student Name: Instructor Class: McGraw-Hill/Irwin Problem 15-09
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern