Intermediate accounting 14 th edition by kieso

This preview shows page 3 - 6 out of 8 pages.

Intermediate Accounting , 14 th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E21-6 (Lessor Entries, Sales-Type Lease) Wadkins Company, a machinery dealer, leased a (a) Compute the amount of the lease receivable. (Use the Excel Present Value formula "=PV(" to solve.) (b) Prepare all necessary journal entries for Wadkins for 2012.
Image of page 3

Subscribe to view the full document.

124b8484d9a19178c2e6773d420a93696af19ecd.xlsx, Exercise 21-6, Page 4 of 8, 03/29/2012, 01:32:43 Name: Date: Instructor: Course: machine to Romero Corporation on January 1, 2012. The lease is for an 8 -year period and requires equal annual payments of $38,514 at the beginning of each year. The first payment is received on January 1, 2012. Wadkins had purchased the machine during 2011 for $170,000 Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Wadkins. Wadkins set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wadkins at the termination of the lease. Instructions: Use this area to enter the Present Value formula Jan 1, 12 Account Title Amount Account Title Amount Account Title Amount Account Title Amount Jan 1, 12 Account Title Amount Account Title Amount Dec 31, 12 Account Title Amount Account Title Amount Intermediate Accounting , 14 th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E21-6 (Lessor Entries, Sales-Type Lease) Wadkins Company, a machinery dealer, leased a (a) Compute the amount of the lease receivable. (Use the Excel Present Value formula "=PV(" to solve.) (b) Prepare all necessary journal entries for Wadkins for 2012.
Image of page 4
124b8484d9a19178c2e6773d420a93696af19ecd.xlsx , Problem 21-4 Solution, Page 5 of 8, 03/29/2012, 01:32:43 Name: Solution Date: Instructor: Course: Inception date: October 1, 2012 Lease term: 6 years Economic life of lease equipment: 6 years Fair value of asset at October 1, 2012: $300,383 Residual value at end of lease term: 0 Lessor's implicit rate: 10% Lessee's incremental borrowing rate: 10% $62,700 responsibility for all executory costs, which amount to $5,500 per year, and are paid each Date: 10/01/12 300,383 10/01/12 62,700 62,700 237,683 10/01/13 62,700 23,768 38,932 198,751 10/01/14 62,700 19,875 42,825 155,926 10/01/15 62,700 15,593 47,107 108,819 10/01/16 62,700 10,882 51,818 57,001 10/01/17 62,700 5,699* 57,001 0 376,200 70,118 300,383 *Rounding error is $1. Interest expense (See amortization schedule) $23,768 Lease executory expense $5,500 Depreciation expense ($300,383 ÷ 6) $50,064 Current liabilities: Lease liability $38,932 Interest payable $23,768 Long-term liabilities: Lease liability $198,751 Property, plant, and equipment: Leased equipment $300,383 Accumulated depreciation ($50,064) Interest expense (See amortization schedule) $19,875 Lease executory expense $5,500 Depreciation expense ($300,383 ÷ 6) $50,064 Current liabilities: Lease liability $42,825 Interest payable $19,875 Long-term liabilities: Lease liability $155,926 Property, plant, and equipment: Leased equipment $300,383 Accumulated depreciation ($100,128) Interest expense [$23,768 × (3/12)] $5,942 Lease executory expense [$5,500 × (3/12)] $1,375 $12,516 Current liabilities: Lease liability $38,932 Interest payable $5,942 Long-term liabilities: Lease liability $198,751 Property, plant, and equipment: Leased equipment $300,383 Accumulated depreciation ($12,516) Current assets: Prepaid lease executory costs [$5,500 × (9/12)] $4,125 Interest expense [($23,768 - $5,942) + ($19,875 × (3/12))]
Image of page 5

Subscribe to view the full document.

Image of page 6
You've reached the end of this preview.

{[ 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