Please complete all of it, it is all 1 exercise. Please use the accounts from th

Question

Please complete all of it, it is all 1 exercise. Please use the accounts from the list i provided.

Problem 21-3 Windsor Industries and Sheridan Inc. enter into an agreement that requires Sheridan Inc. to build three diesel-electric engines to Windsor's specifications. Upon completion of the engines, Windsor has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is noncancelable, becomes effective on January 1, 2017, and requires annual rental payments of $445,159 each January 1, starting January 1, 2017 Windsor's incremental borrowing rate is 10%. The implicit interest rate used by Sheridan Inc. and known to windsor is 9%. The total cost of building the three engines is $2,713,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Windsor depreciates similar equipment on a straight-line basis. At the end of the lease, Windsor assumes title to the engines. Collectibility of the lease payments is reasonably certain; no uncertainties exist relative to unreimbursable lessor costs r table (b) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the books of Windsor Industries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. 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.) Account Titles and Explanation Debit Credit (c) Prepare the journal entry or entries to record the transaction on January 1, 2017, on the boks of Sheridan Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit (d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2017. (Credit account titles are automatically indented when amount is entered Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Lessee (January 1, 2017) Debit Credit Lessor (January 1, 2017) Debit Credit

Explanation / Answer

Calculation of fair value of lease payments

(d) Entry to record the first lease payment

Present value of the lease payments: 445159 x (1-(1/(1.09)^10)/0.09) x (1.09) 445159 x ((1-0.4224)/0.09) x 1.09 445159 x (13.5903)x1.09 3113997 or 3,114,000 (rounded)

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