60.1K

Verified Solution

Link Copied!

Oakridge Leasing Corporation signs an agreement on January 1, 2020, to lease equipment to Wildhorse Limited. Oakridge and Wildhorse follow ASPE. The following information relates to the agreement.

1.		The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years.
2.		The assets fair value at January 1, 2020, is $81,000.
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 $6,700, which is not guaranteed.
4.		Wildhorse Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $940 to Rocky Mountain Insurance Ltd. for insurance and $1,660 to James Township for property taxes.
5.		The agreement requires equal annual rental payments of $19,121 to Oakridge, the lessor, beginning on January 1, 2020.
6.		The lessees incremental borrowing rate is 13%. The lessors implicit rate is 12% and is known to the lessee.
7.		Wildhorse Limited uses the straight-line depreciation method for all equipment.
8.		Wildhorse uses reversing entries when appropriate

Prepare an amortization schedule for Wildhorse Limited for the lease term. (Hint: You may find the ROUND formula helpful for rounding in Excel.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 1,452.)

Wildhorse Limited (Lessee) Lease Amortization Schedule
Date		Annual Lease Payment		Interest on Unpaid Obligation		Reduction of Lease Obligation		Balance of Lease Obligation
1/1/20								$enter a dollar amount
1/1/20		$enter a dollar amount				$enter a dollar amount		enter a dollar amount
1/1/21		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/22		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/23		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
1/1/24		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount		$enter a total amount		$enter a total amount

Prepare all of Wildhorses journal entries for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessees annual accounting period ends on December 31 and that Wildhorse uses reversing entries. (Credit account titles are automatically indented when the 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. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title to record inception of lease and first lease payment	enter a debit amount	enter a credit amount
	enter an account title to record inception of lease and first lease payment	enter a debit amount	enter a credit amount
	enter an account title to record inception of lease and first lease payment	enter a debit amount	enter a credit amount
	(To record inception of lease and first lease payment.)
During 2020	enter an account title to record payment of insurance	enter a debit amount	enter a credit amount
	enter an account title to record payment of insurance	enter a debit amount	enter a credit amount
	(To record payment of insurance.)
During 2020	enter an account title to record payment of property taxes	enter a debit amount	enter a credit amount
	enter an account title to record payment of property taxes	enter a debit amount	enter a credit amount
	(To record payment of property taxes.)
12/31/20	enter an account title to record interest	enter a debit amount	enter a credit amount
	enter an account title to record interest	enter a debit amount	enter a credit amount
	(To record interest.)
12/31/20	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	(To record depreciation expense.)
1/1/21	enter an account title to record interest accrual reversing entry	enter a debit amount	enter a credit amount
	enter an account title to record interest accrual reversing entry	enter a debit amount	enter a credit amount
	(To record interest accrual reversing entry.)
1/1/21	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	(To record lease payment.)
During 2021	enter an account title to record payment of insurance	enter a debit amount	enter a credit amount
	enter an account title to record payment of insurance	enter a debit amount	enter a credit amount
	(To record payment of insurance.)
	enter an account title to record payment of property taxes	enter a debit amount	enter a credit amount
	enter an account title to record payment of property taxes	enter a debit amount	enter a credit amount
	(To record payment of property taxes.)
Dec. 31, 2021	enter an account title to record interest on December 31	enter a debit amount	enter a credit amount
	enter an account title to record interest on December 31	enter a debit amount	enter a credit amount
	(To record interest.)
12/31/21	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	(To record depreciation expense.)

Answer & Explanation Solved by verified expert

See Answer