Windsor Company manufactures a check-in kiosk with an estimated economic life of

Question

Windsor Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $262,268, and its unguaranteed residual value at the end of the lease term is estimated to be $21,400. National will pay annual payments of $36,200 at the beginning of each year. Windsor incurred costs of $177,800 in manufacturing the equipment and $4,400 in sales commissions in closing the lease. Windsor has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 9%.
1. Compute the amount of each of the following items.(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. 5,275.)
(1) Lease receivable $
(2) Sales price $
(3) Cost of sales
2. Prepare a 10-year lease amortization schedule for Windsor, the lessor. (Round answers to 0 decimal places e.g. 5,275.)
3. Prepare all of the lessor’s journal entries for the first year. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 5,275.)

Explanation / Answer

(1) Lease receivable $ 36200*6.99525= 253228.05 (P/A, 9%,10) (2) Sales price ( PV of minimum lease payments-PV of Residual Value) 253228.1-7608.34= 245619.71 (3) Cost of sales ----(Cost-PV of Residual Value ) 177800-7608.34 = 170191.66 (P/F, 9%,10) 2.10-year lease amortization schedule for Windsor, the lessor Year Annuity Tow. Int. Tow. Princ. Principal balance 253228.05 1 36200 0 36200 217028.05 2 36200 19532.52 16667.48 200360.57 3 36200 18032.45 18167.55 182193.03 4 36200 16397.37 19802.63 162390.40 5 36200 14615.14 21584.86 140805.53 6 36200 12672.5 23527.5 117278.03 7 36200 10555.02 25644.98 91633.06 8 36200 8246.975 27953.03 63680.03 9 36200 5731.203 30468.8 33211.23 10 36200 2989.011 33210.99 0.24 3. Lessor's Journal Entries Account Title Debit Credit Lease receivable 253228.05 COGS 170191.66 Sales 245619.71 Inventory 177800 (to record inception) 423419.71 423419.71 Sales Commission 4400 Cash 4400 (Sales Commission) Cash 36200 Lease receivable 36200 (Initial Lease instalment recd.) Interest Receivable 19532.52 Interest Income 19532.52 (253228.05-36200)*9% (to accrue interest income)

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

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