Business, 20.09.2021 08:30 Juniper816
The following facts pertain to a non-cancelable lease agreement between Tamarisk Leasing Company and Carla Vista Company, a lessee.
Commencement date May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020 $ 15,852.19
Bargain purchase option price at end of lease term $ 5,000
Lease term 5 years
Economic life of leased equipment 10 years
Lessor’s cost $ 50,000
Fair value of asset at May 1, 2020 $ 68,000
Lessor’s implicit rate 11 %
Lessee’s incremental borrowing rate 11 %
The collectibility of the lease payments by Tamarisk is probable.
A. Compute the amount of the lease receivable at commencement of the lease
B. Prepare a lease amortization schedule for Tamarisk for the 5-year lease term.
C. Prepare the journal entries to reflect the signing of the lease agreement and to record the receipts and income related to this lease for the years 2020 and 2021. The lessor’s accounting period ends on December 31. Reversing entries are not used by Tamarisk.
D. Suppose the collectibility of the lease payments was not probable for Tamarisk. Prepare all necessary journal entries for the company in 2020.
(round answers to two decimal places)
Answers: 2
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