ACC202WA3Excel - Student Name: Tom Baker Class: ACC202...

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Student Name: Tom Baker Class: ACC202 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) This is a capital lease to the lessee. Present value of the minimum lease payments are recorded as a leased asset and a leased liability. (b) By Rhone-Metro (the lessor) This is a direct financing lease. The fair value = carrying value, as such there is no dealer's profit. 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! 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 19,324 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)
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ACC202WA3Excel - Student Name: Tom Baker Class: ACC202...

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