Exercise 21A-5 a-c (Part Level Submission) Splish Brothers Leasing Company signs

Question

Exercise 21A-5 a-c (Part Level Submission) Splish Brothers Leasing Company signs an agreement on January 1, 2017, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $401,000. The fair value of the asset at January 1, 2017, is $401,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $22,050, none of which is guaranteed 4. The agreement requires equal annual rental payments, beginning on January 1, 2017 5. Collectibility of the lease payments by Splish Brothers is probable. iew the factor tabl (a) Assuming the lessor desires a 8% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and the final answer to O decimal places e.g. 5,275.) Amount of the annual rental payment Click if you would like to Show Work for this question: Open Show Work

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Journal entries

277,500

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Date Particulars L.F Amount ($) Amount ($) 2017 Jan-01 Lease Receivable 277,500 Lease aset 277500 (For equipment given on lease) Dec-31 Cash 152,629 Lease Receivable 138,754 Interest Receivable (277,500*5%) 13,875 (for cash received for 1st Instalment) 2018 Dec-31 Cash 145,691 Lease Receivable 138,754 Interest Receivable (277,500-138,754)*5%) 6,937 (for cash received for 2nd Instalment)

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