PLEASE HELP ASAP!~ E21-10 (LO3) (Computation of Rental; Journal Entries for Less

Question

PLEASE HELP ASAP!~

E21-10 (LO3) (Computation of Rental; Journal Entries for Lessor) Morgan 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 noncancelable 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 $245,000. The fair value of the asset at January 1, 2017, is $245,000. 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 $43,622, none of which is guaranteed. 4. Cole Company assumes direct responsibility for all executory costs. 5. The agreement requires equal annual rental payments, beginning on January 1, 2017 6. Collectibility of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor.

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1. Computation of Rental (Assuming 10% Rate) Fair Value 245000 Less: PV of Residual Value (Working Below) -24623 Amount to be recovered by Lease 220377 PV factor of annuity (i=10%,n=6) 4.79079 Annual Payment Required 220377/4.79079 46000 Residual Value 43622 PV of Single Sum (1=10%,n=6) 0.56447 PV Of Residual Value 24623 2. Amortisation Schedule Date Annual Lease Interest Receivable Recovery of Lease Lease Receivable A B 10% of previous Lease C=A-B D 01-01-2017 245000 01-01-2017 46000 0 46000 199000 01-01-2018 46000 19900 26100 172900 01-01-2019 46000 17290 28710 144190 01-01-2020 46000 14419 31581 112609 01-01-2021 46000 11261 34739 77870 01-01-2022 46000 7787 38213 39657 31-12-2022 43622 3965 39657 0 3. Lessor Journal Entry Date Account Debit Credit 01-01-2017 Lease Receivable 245000 Equipment 245000 01-01-2017 Cash 46000 Lease Receivable 46000 31-12-2017 Interest Receivable 19900 Interest Revenue 19900 01-01-2018 Cash 46000 Lease Receivable 26100 Interest Receivable 19900 31-12-2018 Interest Receivable 17290 Interest Revenue 17290

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