90.2K

Verified Solution

Link Copied!

On January 1, 2021, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 12% rate of return for providing long-term financing. The lease agreement specified the following: a. Ten annual payments of $59,000 beginning January 1, 2021, the beginning of the lease and each December 31 thereafter through 2029. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $329,069. c. The lease qualifies as a finance lease/sales-type lease. d. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $7,000 per year are specified, beginning January 1, 2021. NRC was to pay this cost as incurred, but lease payments reflect this expenditure. e. A partial amortization schedule, appropriate for both the lessee and lessor, follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Decrease in Balance Outstanding Balance Payments Effective Interest (12% x Outstanding balance) 1/1/2021 12/31/2021 12/31/2022 = 52,000 52,000 52,000 329,069 277,069 258, 317 237, 315 0.12 (277,069) 0.12 (258, 317) 52,000 18,752 21, 002 33,248 30,998 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. (Round your intermediate Required 1 Required 2 Prepare the appropriate entries for the lessee related to the lease on January 1, 2021 and December 31, 2021. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Joumal Debit Credit 1 329,069 January 01, 2021 Right-of-use asset Lease payable Oo 329,069 N January 01, 2021 Lease payable Cash X 3 December 31, 202 Lease payable Interest expense Cash 59.000 4 December 31, 202 Amortization expense Right-of-use asset Required 2 > Required 1 Required 2 Prepare the appropriate entries for the lessor related to the lease on January 1, 2021 and December 31, 2021. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Joumal Debit Credit 1 329,069 January 01, 2021 Lease receivable Equipment 329.069 2 January 01, 2021 Cash Lease receivable 70,000 December 31, 202 Cash Lease receivable Interest revenue

Answer & Explanation Solved by verified expert

See Answer