Please help with numbers 6. Thank you in advance. Bidwell Leasing purchased a single-engine plane for its fair value of $771,147 and leased it to Red Baron Flying Club on January 1, 2018.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Terms of the lease agreement and related facts were: Eight annual payments of $135,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 through 2024. Bidwell Leasing’s implicit interest rate was 11%. The estimated useful life of the plane is eight years. Payments were calculated as follows: Amount to be recovered (fair value) $ 771,147 Lease payments at the beginning of each of the next eight years: ($771,147÷ 5.7122) $ 135,000 Present value of an annuity due of $1: n = 8, i = 11%. Red Baron's incremental borrowing rate is 12%. Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091. 6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest dollar amount.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Please help with numbers 6. Thank you in advance.

Bidwell Leasing purchased a single-engine plane for its fair value of $771,147 and leased it to Red Baron Flying Club on January 1, 2018.(FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Terms of the lease agreement and related facts were:

Eight annual payments of $135,000 beginning January 1, 2018, the beginning of the lease, and at each December 31 through 2024. Bidwell Leasing’s implicit interest rate was 11%. The estimated useful life of the plane is eight years. Payments were calculated as follows:


Amount to be recovered (fair value)	$	771,147
Lease payments at the beginning of each of the next eight years: ($771,147÷ 5.7122*)	$	135,000

*Present value of an annuity due of $1: n = 8, i = 11%.

Red Baron's incremental borrowing rate is 12%.
Incremental Costs of negotiating and consummating the completed lease transaction incurred by Bidwell Leasing were $21,091.

6. Prepare the appropriate entries for both Red Baron and Bidwell Leasing on December 31, 2018 (the second lease payment). Both companies use straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations to the nearest dollar amount.)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions