Unformatted text preview: 31, 2013.
1/1/2013 Lessor: 12/31/2013 Terms of a lease agreement and related facts were:
e. Leased asset had a retail cash selling price of $100,000. Its useful life was six years with no residual value (straight-line depreciation).
Annual lease payments at the beginning of each year were $20,873, beginning January 1.
Lessor's implicit rate when calculating annual rental payments was 10%.
Costs of negotiating and consummating the completed lease transaction Cost
>initial direct incurred by the lessor were $2,062.
Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. Required: appropriate entries for the lessor to record the lease, the initial payment at its inception, and at the December 31 fiscal year-end under each
of the following three independent assumptions:
1. The lease term is three years and the lessor paid $100,000 to acquire the asset (operating lease).
Operating Lease - The only revenue is rental revenue.
Initial direct cost 2. The lease term is six years and the lessor paid $100,000 to acquire the asset (direct financing lease). Also assume that adjusting the net investment
by initial direct costs reduces the effective rate of interest to 9%.
Imputed interest rate:
PV of Minimum Lease Payments
Rounded by author to $100,000 Decrease Outstand
Payments Interest Balance Balance 12/31/2013 1 /1/13
1/1/2018 3. The lease term is six years and the lessor paid $85,000 to acquire the asset (sales-type lease).
Payments Interest Balance Balance
1/1/2018 12/31/2013 rounding...
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