Question

nment NEXT CALCULATOR PRINTER VERSION BACK Brief Exercise 21-11 Skysong Cerporation manufactures replicators. On January 1, 2017, it leased to Althaus Company a replicater that had cost $99,400 to manufacture. The lease agreement covers the 5-year useful life of the replicator and requires 5 equal annual rentals of $44,500 payable each January 1, beginning January 1, 2017. An interest rate of 11 % is implicit in the lease agreement. Collectibility of the rentals is reasonably assured, and there are no important uncertainties conceming costs Prepare Skysong's January 1, 2017, journal entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal pleces, e.g. 1.25124 and the final answer to 0 decimal places eg. 58,971.) Cick here to iew factor tables Account Titles and Explanation Date Debit Credit January 1, 2017 (To record the lease) January 1, 2017 ady (To record cost) January 1, 2017 (To record first lease payment.) SHOW LIT OF ACCOUNTS

Answer 1

SOLUTION

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
January 1, 2017	Lease receivable	182,559
	Sales revenue		182,559
	(To record lease)
January 1, 2017	Cost of goods sold	99,400
	Inventory		99,400
	(To record the cost)
January 1, 2017	Cash	44,500
	Lease receivable		44,500
	(To record first lease payment)

* Fair value of lease = Amount * PV (5 equal installments discounted at 11%)

= $44,500 * 4.10245

= 182,559