Exercise 21-6 Prepare all necessary journal entries for Crosley for 2014. (Credi

Question

Exercise 21-6

Prepare all necessary journal entries for Crosley for 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 58,971.)

Exercise 21-6

Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2014. The lease is for an 10-year period and requires equal annual payments of $42,462 at the beginning of each year. The first payment is received on January 1, 2014. Crosley had purchased the machine during 2013 for $160,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Crosley. Crosley set the annual rental to ensure an 10% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease.

Explanation / Answer

Amount of Lease Receivable= $287001.67

Year Lease Rent PVF@10% Rent*PVF 0 42462 1.00000 $42,462.00 1 42462 0.90909 $38,601.82 2 42462 0.82645 $35,092.56 3 42462 0.75131 $31,902.33 4 42462 0.68301 $29,002.12 5 42462 0.62092 $26,365.56 6 42462 0.56447 $23,968.69 7 42462 0.51316 $21,789.72 8 42462 0.46651 $19,808.84 9 42462 0.42410 $18,008.03 PV of Lease Rent $287,001.67

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