South Bend Corporation purchased equipment on December 30, 2020 at a cost of $180,000. South...
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Accounting
South Bend Corporation purchased equipment on December 30, 2020 at a cost of $180,000. South Bend then leased the equipment to the Kansas Company on January 1, 2021. The lease is classified as a sales-type lease by South Bend.
The lease term is non-cancelable 6 years. Lease payments of $42,000 are to be made at the end of each year for six years with first payment on 12/31/2021. The estimated economic life of the equipment is 7 years. South Bend estimates a 10,000 residual value at the end of the lease term, which is unguaranteed.
The implicit interest rate for South Bend is 6%
The collectibility of the lease payments is probable.
Required:
a. prepare a lease amortization schedule over the first 3 years of the lease term for the lessor (South Bend)
b. Prepare the journal entries regarding the lease for the lessor (south Bend) for 2021 and 2022.
c. Prepare partial balance sheets for the lessor (South Bend) as of December 31, 2022.
d. If the lessor (South Bend) paid $5,000 in sales commission in closing the lease on 1.1.2021, prepare the journal entry needed.
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