On January 1, 2012, Palmer Company leased equipment to Woods Corporation. The fo

Question

On January 1, 2012, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.

1.
The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2.
Equal rental payments are due on January 1 of each year, beginning in 2012. 3.
The fair value of the equipment on January 1, 2012, is $195,700, and its cost is $150,689. 4.
The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,330. Woods depreciates all of its equipment on a straight-line basis. 5.
Palmer sets the annual rental to ensure an 9% rate of return. Woods On January 1, 2012, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.

1.
The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2.
Equal rental payments are due on January 1 of each year, beginning in 2012. 3.
The fair value of the equipment on January 1, 2012, is $195,700, and its cost is $150,689. 4.
The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,330. Woods depreciates all of its equipment on a straight-line basis. 5.
Palmer sets the annual rental to ensure an 9% rate of return. Woods Question 4 On January 1, 2012, Palmer Company leased equipment to Woods Corporation. The following information pertains to this lease.

1.
The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2.
Equal rental payments are due on January 1 of each year, beginning in 2012. 3.
The fair value of the equipment on January 1, 2012, is $195,700, and its cost is $150,689. 4.
The equipment has an economic life of 8 years, with an unguaranteed residual value of $10,330. Woods depreciates all of its equipment on a straight-line basis. 5.
Palmer sets the annual rental to ensure an 9% rate of return. Woods

Explanation / Answer

a) Annual Rentals      42,630 (c) Prepare all the necessary journal entries for Woods for 2011 Leased Equipment 187,600 Leased Liability 187,600 (To record the lease.) Lease Liability      42,630 Cash      42,630 (To record lease payment.) Depreciation expense      31,267 Accumulatyed dep      31,267 (To record depreciation.) Interst expense      14,497 Interest payable      14,497 Prepare all the necessary journal entries for Palmer for 2012. Lease Receivable 195,700 Cost of good sold 144,179 Sales Revenue 189,190 Inventory 150,689 Cash      42,630 Lease Receivable      42,630 Interest receivable      22,186 Interest revenue      22,186                                          195,700 FV                                            42,630 rentals                                          153,070                                          137,763

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.