Exercise 21-5 Culver Leasing Company leases a new machine that has a cost and fa

Question

Exercise 21-5

Culver Leasing Company leases a new machine that has a cost and fair value of $73,000 to Sharrer Corporation on a 3-year noncancelable contract. Sharrer Corporation agrees to assume all risks of normal ownership including such costs as insurance, taxes, and maintenance. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2017. Culver Leasing Company expects to earn a 9% return on its investment. The annual rentals are payable on each December 31.

(b) Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (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.)

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Rent Receipt/ Payment

Interest Revenue/ Expense

Reduction of Principal

Receivable/ Liability

Rent Receipt/ Payment

Interest Revenue/ Expense

Reduction of Principal

Receivable/ Liability

1/1/17 $

$

$

$

12/31/17

12/31/18

12/31/19

Explanation / Answer

Rent Receipt/ Payment Interest Revenue/ Expense Reduction of Principal Receivable/ Liability 1/1/2017 73000 12/31/2017 28839 6570 22269 50731 12/31/2018 28839 4566 24273 26458 12/31/2019 28839 2381 26458 0

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