Question

+ Cullusobas Company leases a building to Walsh, Inc. on January 1, 2017. The following facts pertain to the lease agreement. 4 1. The lease term is 6 years, with equal annual rental payments of $3,137 at the beginning of each year. 2. Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of a specialized nature. 3. The building has a fair value of $16,800, a book value to Cullumber of $9,800, and a useful life of 7 years. At the end of the lease term, Gulushes, and Walsh expect there to be an unguaranteed residual value of $2,450. 5. Cullumbas wants to earn a return of 9% on the lease, and collectibilty of the payments is probable. This rate is known by Walsh. Click here to view the factor table. (b) Using the original facts of the lease, show the journal entries to be made by both Cullwobes and Walsh in 2017. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to o decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Cullumbac. Journal Entries Account Titles and Explanation Debit Credit Date 1/1/17 (To record the lease) (To record lease payment) 12/31/17 Walsh's Journal Entries Account Titles and Explanation Debit Credit Date 1/1/17 (To record the lease) (To record lase ability) 12/31/17 To record interest.exe

Answer 1

Inswer page: (b) journal entries to be made by both cullumber and walsh in 2017 Annual rent payments $3137 PVAF (6 periods, 9.6.) - 5.400 197 present value of rental payment = $ 3137 x 5.100197 $15499.3 Expected residual value (unguarantee) = 42450 PNF C 6 periods, 96) = 0,5963 present value 6 residual value = +1461 (2450 x0.5963) lease receivable †15999, 3+#1461 & 17460 journal entry : Cullumber Date Account title of Explanation Debit ($) credit ca janı, 2014) lease receivable 17460 cost of goods sold 8339 sales revenue 15999 inventory (Book value) 9800 (to record lease contract) cash lease receivable Cto record first payment received) lease receivable 1289 |Dec 31, 2017 interest revenue 1289 interest (17460 - 3137) X9.1 3137 Ljan , 1 2017 313+ (To read first year

02 15999 3137 3137 Walsh's page:02 Date Account title toplanation Debit($) wedited) janı , 2014 Right to use assets leave liability 15999 (To record lease) jan 1,2017 Tease liability cash '(To record first payment) Interest Expense rease liability (15999-3134) x 9.%. (to neurd interest expense) Dec 31 Depreciation expense 2666 2017 right to use asset (1599916 year) Cto gecord depreciation) 1157 DOC 31 2017 1157 2666