Question

Blossom Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $90,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Blossom expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.

Blossom Leasing company leases a new machine lo harrer Corporation. The machine has a cost of $65.000 and fair value of 390 500 Under the 3-year, non-cancelable contract. Sarrer wil receive title to the machine at the end of the lease. The machine has a 3-year Useful life and mores cual value Thelease was signed on January 1.2020. Blossom expects to earn an U return on its investment and this implicitrate is known by Sharrer. The annual rentals are payable on each December 31 beginning December 31, 2020 Click here to view factor tables Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. For calculation purposes, se decimal places as displayed in the factor table provided and round find answers to decimal places eg 5.27.5.1 Rent Receipt Payment Interest Revenue Expense Reduction of Principal Receivable/Liability $ Date 1/1/20 12/31/20 12/31/21 12/31/22 Textbook and Media List of Accounts Prepare the journal entry at commencement of the lease for Bkssom Creditrocountiles are stomatically indeed when amount is entered Dontinent Debit Credit Date Account Titles and Explanation 1/1/20 e Textbook and Media List of Accounts Prepare the journal entry at commencement of the base for Sharrar. C om o way wount is ai. Dertinent mol Debit Credit Date Account Titles and Explanation 1/1/20 Textbook and Media List of Accounts Sharerincurs initial directs casts of $9.500 ( C o unt automatische en munterw. Dort immoral For Prepare the journal entry at commencement of the lease for Sharter, urine | Sharer does not know Blossoms implicitate Sarrer's incremental borrowing rate is 92 and calculation purposes, use 3 decimal places as displayed in the factori provided and round find answers to decimal places 5275. Debit Date Account Tities and Explanation 1/1/20 Credit

Answer 1

$ $ Fair value PVAF 8%, 3 years Annual lease payemnt 90,500 2.57710 $ 35,117 Amortization schedule $ Date Rent receip[t/payment 01-01-2020 12/31/20 $ 12/31/21 $ 12/31/22 $ Interest reduction of Receivable revenue/expense principal |/liebailty 90,500 35,117 $ 7,240 $ 27,877 $ 62,623 35,117 $ 5,010$ 30,107 $ 32,516 35,117 $ 2,601$ 32,516 $ 0 Debit Credit Blossom Date Account title and explanation 01-01-2020 Lease receivable Cost of goods sold Sales revenue Inventory (To record the lease) $ $ 90,500 65,000 $ $ 90,500 65,000 Credit Sharrer Corporation Date Account title and explanation 01-01-2020 Right to use asset Lease liabilty Debit 90,500 $ $ 90,500

$ $ $ 35,117 3 88,891 Annual lease payemnt PVAF 9%, 3 years lease liabity Sharrer Corporation Date Account title and explanation 01-01-2020 Right to use asset Cash Lease liabilty Credit Debit 98,391 $ $ $ 9,500 88,891