PLEASE HELP ASAP WITH E21-9 HERE IS 21-8 THAT IS ASKED FOR IN THE PROBLEM E21-9

Question

PLEASE HELP ASAP WITH E21-9

HERE IS 21-8 THAT IS ASKED FOR IN THE PROBLEM

E21-9 (L04) (Lessor Entries with Bargain-Purchase Option) A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8. Instructions (Round all numbers to the nearest cent.) Refer to the data in E21-8 and do the following for the lessor. (a) Compute the amount of the lease receivable at the inception of the lease. (b) Prepare a lease amortization schedule for Mooney Leasing Company for the 5-year lease term. (c) Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2017, 2018, and 2019. The lessor's accounting period ends on December 31. Reversing entries are not used by Mooney

Explanation / Answer

a. The lease has bargain purchase option The colectibility of lease payments is resonably predictable No important uncertainties surrounding the costs yet to be incurred by the lessor. So, it is a capital lease for Mooney Leasing Company, the Lessor Amount of Lease receivable= PV of annual lease payments+PV of Bargain Purchase option PV of annual lease payments=21227.65*4.16987= 88516.54 PV of Bargain purchase option =4000*0.62092= 2483.68 So, Lease receivable at inception= 88516.44+2483.68= 91000.12 AS the above value of minimum lease payments ,91000 exceeds the lessor's cost 65000,this is a SALE-TYPE lease to the Lessor. b.   Lease Amortisation Schedule Mooney Leasing Company, Lessor Annual Lease payments Tow. Int. at 10% Tow. Lease amt. Lease receivable 1-May-17 91000.12 1-May-17 21227.65 0 21227.65 69772.47 1-May-18 21227.65 6977.25 14250.40 55522.07 1-May-19 21227.65 5552.21 15675.44 39846.62 1-May-20 21227.65 3984.66 17242.99 22603.64 1-May-21 21227.65 2260.36 18967.29 3636.35 Apr 30,2022 4000 363.63 3636.37 -0.02 c..Journal Entries Date Account Title Debit Credit 1-May-17 Lease receivable 91000.12 Sales 91000.12 COGS 65000 Inventory 65000 Cash 21227.65 Lease receivable 21227.65 Dec 31,2017 Interest Receivable 4651.5 Interest Revenue 4651.5 (6977.25*8/12) 1-May-18 Cash 21227.65 Lease receivable 14250.40 Interest Receivable 4651.5 Interest Revenue 2325.75 (6977.25-4651.5) Dec 31,2018 Interest Receivable 3701.47 Interest Revenue 3701.47 (5552.21*8/12) 1-May-19 Cash 21227.66 Lease receivable 15675.44 Interest Receivable 3701.47 Interest Revenue 1850.74 (5552.21-3701.47) Dec 31,2019 Interest Receivable 2656.44 Interest Revenue 2656.44 (3984.66*8/12)

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