I'm having such a hard time with: 1. calculating the selling price 2. preparing the journal entries for the 3 years it is asking for 3. preparing the balance sheet Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016. The lease terms, provisions, and related events are as follows: • The lease is noncancelable and has a term of 8 years. • The annual rentals are $32,000, payable at the end of each year. • Tilson agrees to pay all executory costs. • The interest rate implicit in the lease is 14%. • The cost of the equipment to the lessor is $110,000. • The lessor incurs no material initial direct costs. • The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. • The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years. Required: 1. Calculate the selling price implied by the lease and prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this sales-type lease. 2. Next Level State why this is a sales-type lease. 3. Prepare journal entries for Lamplighter for the years 2016, 2017, and 2019. 4. Prepare partial balance sheets for Lamplighter for December 31, 2016, and December 31, 2017, showing how the accounts should be disclosed.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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I'm having such a hard time with:

1. calculating the selling price

2. preparing the journal entries for the 3 years it is asking for

3. preparing the balance sheet

Lamplighter Company, the lessor, agrees to lease equipment to Tilson Company, the lessee, beginning January 1, 2016. The lease terms, provisions, and related events are as follows:

•	The lease is noncancelable and has a term of 8 years.
•	The annual rentals are $32,000, payable at the end of each year.
•	Tilson agrees to pay all executory costs.
•	The interest rate implicit in the lease is 14%.
•	The cost of the equipment to the lessor is $110,000.
•	The lessor incurs no material initial direct costs.
•	The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor.
•	The lessor estimates that the fair value at the end of the lease term will be $20,000 and that the economic life of the equipment is 9 years.

Required:

1.	Calculate the selling price implied by the lease and prepare a table summarizing the lease receipts and interest revenue earned by the lessor for this sales-type lease.
2.	Next Level State why this is a sales-type lease.
3.	Prepare journal entries for Lamplighter for the years 2016, 2017, and 2019.
4.	Prepare partial balance sheets for Lamplighter for December 31, 2016, and December 31, 2017, showing how the accounts should be disclosed.

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