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On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease...

Question

On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease...

On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to ea
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for
On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 13% rate of return for providing long-term financing. The lease agreement specified: a. Ten annual payments of $60,000 beginning January 1, 2018, the beginning of the lease and each December 31 thereafter through 2026. b. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $321912 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 $7,500 per year are specified, beginning January 1 2018. 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. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Decrease in Balance outstanding Payments Effective Interest (13Outstanding balance) 1/1/2018 52,500 12/31/2018 52,5ee 12/31/281952, see 321,912 269,412 251,916 232,188 52,50 17, 476 19,748 0.13 (269,412) = 35,024 0.13 (251,936) = 32,752 Required: 1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2018 and December 31, 2018 2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018, Complete this question by entering your answers in the tabs below.
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, 2018 and December 31, 2018. (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.) View transaction list 1 Record lease by lessee. 2 Record the cash payment. 3 Record the cash payment. 4 Record the amortization of Right-of-use asset. Credit
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018. (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.) View transaction list 1 Record lease by lessor (include maintenance fee accrual). 2 Record the cash received (include maintenance fee accrual). 3 Record cash received by lessor. Credit

Answers

Answer 1

Entries for Lessee:
Date Account Title & Explanation Debit Credit
2018
Jan-01 Right-of-use asset 321912
Lease payable 321912
(To record the lease payment)
Jan-01 Lease payable 52500
Maintenance fee 7500
Cash 60000
(Payment of lease rent)
Dec-31 Interest expense 35024
Lease payable (difference) 17476
Maintenance Expenses 7500
Cash (Lease payment) 60000
Dec-31 Amortization Expense 32191
Right-of-use asset 32191
(To record amortization expenses)

Answer 2

Entries for Lessor:
Date (2018) Account Title & Explanation Debit Credit
Jan-01 Lease receivable 321912
Equipment 321912
(To record the equipment on lease)
Jan-01 Cash (Lease payment) 60000
Lease receivable 52500
Maintenance fees payable 7500
(To record the lease payment)
Dec-31 Cash (Lease Payment) 60000
Maintenance fee payable 7500
Interest revenue 35024
Lease receivable 17476


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