Brief Exercise 21-11 Blossom Corporation manufactures replicators. On January 1,

Question

Brief Exercise 21-11

Blossom Corporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicator that had cost $102,700 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $41,200 payable each January 1, beginning January 1, 2017. An interest rate of 12% is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties concerning costs.

Prepare Blossom’s January 1, 2017, journal entries.

edugen.wileyplus.com/edugen/lti/main.uni reasonably assured, and there are no important uncertainties concerning costs (Credit account titles are automatically indented when amount is entered Prepare Blossom's January 1. 2017, journal entries 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.) Date Account Titles and Explanation Debit Credit January 1, 2017 Lease Receivable Sales Revenue (To record the lease.) January 1, 2017 Cost of Goods Sold Inventory (To record cost.) January 1, 2017 Cash Lease Receivable (To record first lease payment.) Question Attempts: O of 1 used SAVE FOR LATER SUBMIT ANSWER Policy y & Sons,Inc, All Rights Reserved. A Division of John Wiley &Sons;, Inc Version 4.24.5

Explanation / Answer

Calculate fair value of the lease Year Cash flow Discount factor@12% Present value 0 1 0 1 41200 0.892857143 36785.71429 2 41200 0.797193878 32844.38776 3 41200 0.711780248 29325.34621 4 41200 0.635518078 26183.34483 5 41200 0.567426856 23377.98646 Fair value of the lease 148516.77954 Journal Entry Date Accounts title and Explanation Debit Credit 1-Jan-17 Lease receivable 148516.77954 Sales revenue 148516.77954 ( To record the lease) 1-Jan-17 Cost of goods sold 102700 inventory 102700 ( To record cost of manufactuirng) 1-Jan-17 Cash 41200 Lease receivable 41200 ( To record the first lease receipt)

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