80.2K

Verified Solution

Link Copied!

The following facts pertain to a noncancelable lease agreement between Crane Leasing Company and Cheyenne Company, a lessee.

Inception date:		May 1, 2017
Annual lease payment due at the beginning of
each year, beginning with May 1, 2017		$20,253.44
Bargain-purchase option price at end of lease term		$4,100
Lease term		5	years
Economic life of leased equipment		10	years
Lessors cost		$66,000
Fair value of asset at May 1, 2017		$87,000
Lessors implicit rate		10	%
Lessees incremental borrowing rate		10	%

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0).

a) Prepare a lease amortization schedule for Cheyenne Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.)

CHEYENNE COMPANY (Lessee) Lease Amortization Schedule
Date	Annual Lease Payment Plus BPO	Interest on Liability	Reduction of Lease Liability	Lease Liability
5/1/17	$	$	$	$
5/1/17
5/1/18
5/1/19
5/1/20
5/1/21
4/30/22
	$	$	$

b) Prepare the journal entries on the lessee's books to reflect the signing of the elase agreemnet and to record the payments and expenses related to this lease for the years 2017 and 2018. Cheyenne's annual accounting period ends on December 31. Reversing entries are used by Cheyenne.

Answer & Explanation Solved by verified expert

See Answer