Question

On January 1, 2017, Sage Company leased equipment to Pronghorn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor lease 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The fair value of the equipment on January 1, 2017, is $155,000, and its cost is $124,000. 4. The equipment has an economic life of 8 years, with an unquaranteed residual value of $9,000. Pronghorn depreciates all of its equipment on a straight-line basis 5. Sage set the annual rental to ensure an 11% rate of return. Pronghorn's incremental borrowing rate is 12%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments is reasonably predictable, and no important uncertaint incurred by the lessor. at the termination of the surround the amount of costs yet to be (Both the lessor and the lessee's accounting period ends on December 31.) Click here to view factor tables Calculate the amount of the annual rental payment. (Round present value factor calculationss to 5 decimal places, e.q. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) The amount of the annual rental payment Prepare all the necessary journal entries for Pronghorn for 2017. (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 places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit Date (To record the lease.) (To record lease payment.) To record depreciation.) To record interest.) Prepare all the necessary journal entries for Sage for 2017. (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 places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.) Account Titles and Explanation Debit Credit Date 1/1/17 To record the lease.) (To record lease payment.) 12/31/17 (To record interest.)

Answer 1

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