Riverbed Company, a machinery dealer, leased a machine to Dexter Corporation on

Question

Riverbed Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The lease is for an 8-year period and requires equal annual payments of $39,542 at the beginning of each year. The first payment is received on January 1, 2017. Riverbed had purchased the machine during 2016 for $181,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties suround the amount o costs yet to be incurred by Riverbed Riverbed set the annual rental to ensure an 12% ate ot return. The machine has an economic e of 10 years with no residua value andre er sto i e bed at the termination of the lease. Compute the amount of the lease receivable. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The amount of the lease receivableg SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare all necessary journal ent es for Riverbed for 2017. Credit account es are automatically indented when ano ntis entered for the account titles and enter O for the amounts. Round answers to O decimal places e.g. 58,971 O not in entman ua ·If no enty s equired select o ntry Date Account Titles and Explanation Debit Credit (To record the lease.)

Explanation / Answer

Calculation of Lease receivable Year Lease Payament PV Factor @ 12% PV 0 $         39,542               1.000 $         39,542 1 $         39,542               0.893 $         35,305 2 $         39,542               0.797 $         31,523 3 $         39,542               0.712 $         28,145 4 $         39,542               0.636 $         25,130 5 $         39,542               0.567 $         22,437 6 $         39,542               0.507 $         20,033 7 $         39,542               0.452 $         17,887 Lease Receivable $     2,20,002 The Amount of total lease receivable $220,002 Date Account Title Debit Credit 01/01/2017 Dexter Corporation $ 3,16,336 To Machine $ 1,81,000 To Unearned interest income $     96,334 ($316,336-$220,002) To Gain on lease of asset $     39,002 (To record the lease) 01/01/2017 Bank $     39,542 To Dexter Corporation $     39,542 (To record the first lease payment) 31/12/2017 Unearned interest income $       4,237 ($39,542-$35,305) To Interest Income $       4,237 (To Record Interest Income)

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

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