ncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $500,000.
ncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $500,000.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
Related questions
Question
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
1. | The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. |
2. | The cost of the equipment is $500,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. |
3. | The equipment has a fair value of $500,000. |
4. | Ten-Care agrees to pay all executory costs directly to a third party. |
5. | The lease contains no renewal or bargain purchase option. |
6. | The interest rate implicit in the lease is 14%. |
7. | The initial direct costs are insignificant and assumed to be zero. |
8. | It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. |
Required:
1. | Next Level Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the amount of the equal rental receipts. |
2. | Prepare a table summarizing the lease receipts and interest income earned by Rexon. |
3. | Prepare |
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Chart of Accounts
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rexon Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Next Level
1. Assuming that the lease is a sales-type lease from Rexon’s point of view, calculate the amount of the equal rental receipts.
Additional Instruction
X
Analysis
2. Prepare a table summarizing the lease receipts and interest income earned by Rexon.
Additional Instructions
Rexon Company
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Summary of Lease Payments Received and Interest Income Earned
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1
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Date
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Annual Lease Payment Received
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Interest Income at 14% on Net Investment
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Reduction of Lease Receivable
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Lease Receivable
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January 1, 2019
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December 31, 2019
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December 31, 2020
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December 31, 2021
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December 31, 2022
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December 31, 2023
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December 31, 2024
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December 31, 2025
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December 31, 2026
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General Journal
3a. Prepare the journal entries for 2019.
General Journal Instructions
PAGE 2019
GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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3b. Prepare the journal entries for 2020.
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