Xedugen.wileyplus.com Assignmens>Open Assignment BACK ASSIGNMENT RESOURCES Sandh
ID: 2552163 • Letter: X
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Xedugen.wileyplus.com Assignmens>Open Assignment BACK ASSIGNMENT RESOURCES Sandhill Corp, agreed to lease property from Vaughn Corp. effective January 1, 2017, for an annual payment of $26,622, beginning January 1 2017. The property is made up of land with a fair value of $114,000 and a two-storey office building with a fair value of $160,000 and a useful life of 22 years with no residual value. The implicit interest rate is 9.0%, the lease term is 22 years, and title to the property is transferred to Sandhill at the end of the lease term. Chapter 20 Problenm Material Prepare the required entries made by Sandhill Corp. on January 1, 2017 and at its year end of December 31, 2017. Both Sandhill and Vaughn use ASPE. (Credit account titles are autometically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter o for the amounts. Round answers to 0 decimal places, e.g. 5,275) Date Account Titles and Explanation Debit Credit Jan. 1 Interest Expense Lease Liability Interest Payable 22264 To record inception of lease lan. 1 Liability 22264 Cash 22264 To record first lease payment)Explanation / Answer
Present value of the lease payments is equla to the fair value of the assets leased, whihc can be checked as per the following formula.
Fair value = A x ((1-(1/1+r)^n)/r) x (1+r), where A = 26,622, r=9% and n= 22.
We get the fair value = $274,000.
Lease payment schedule is given below.
Date Lease Interest Annual lease Reduction in Receivable/ Receivable/ Receipt / Lease receivable/ Liability Payable Payment Liability Jan.1, 2017 274000 0 26622 26622 Dec.31,2017 247378 22264 26622 4358 Dec.31,2018 243020 21872 26622 4750 Dec.31,2019 238270 21444 26622 5178 Dec.31,2020 233092 20978 26622 5644 Dec.31,2021 227448 20470 26622 6152 Dec.31,2022 221297 19917 26622 6705 Dec.31,2023 214591 19313 26622 7309 Dec.31,2024 207283 18655 26622 7967 Dec.31,2025 199316 17938 26622 8684 Dec.31,2026 190633 17157 26622 9465 Dec.31,2027 181168 16305 26622 10317 Dec.31,2028 170851 15377 26622 11245 Dec.31,2029 159605 14364 26622 12258 Dec.31,2030 147348 13261 26622 13361 Dec.31,2031 133987 12059 26622 14563 Dec.31,2032 119424 10748 26622 15874 Dec.31,2033 103550 9319 26622 17303 Dec.31,2034 86247 7762 26622 18860 Dec.31,2035 67388 6065 26622 20557 Dec.31,2036 46830 4215 26622 22407 Dec.31,2037 24423 2199 26622 24423 T o t a l 311684 585684 274000Related Questions
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