Avalanche Company manufactures a computer with an estimated economic life of 12 years and leases it to Hurricanes Company for a period of 10 years. The normal selling price of the computer is $206,633, and its unguaranteed residual value at the end of the lease term to be $10,000. Hurricanes will pay annual payments of $30,000 at the beginning each year and all maintenance, insurance, and taxes. Avalanche incurred costs of $135,000 in manufacturing the computer. Avalanche determined that the collectability of the lease payments is reasonably predictable that no additional cost will be incurred and that the implicit rate of interest is 10%. 1.Prepare a 10-year lease amortization schedule for the lessor. (Must use Excel) 2. Prepare all of the lessor’s journal entries for the first, second, and third years (Show all computations) 3. Assume that Hurricanes Company has an incremental borrowing rate of 10%, prepare a 10- year lease amortization schedule. (Must use Excel) 4.Prepare all of the lessee’s journal entries for the first, second, and third years (Show all computations)
Avalanche Company manufactures a computer with an estimated economic life of 12 years and
leases it to Hurricanes Company for a period of 10 years. The normal selling price of the
computer is $206,633, and its unguaranteed residual value at the end of the lease term to be
$10,000. Hurricanes will pay annual payments of $30,000 at the beginning each year and all
maintenance, insurance, and taxes. Avalanche incurred costs of $135,000 in manufacturing the
computer. Avalanche determined that the collectability of the lease payments is reasonably
predictable that no additional cost will be incurred and that the implicit rate of interest is 10%.
1.Prepare a 10-year lease amortization schedule for the lessor. (Must use Excel)
2. Prepare all of the lessor’s
computations)
3. Assume that Hurricanes Company has an incremental borrowing rate of 10%, prepare a 10-
year lease amortization schedule. (Must use Excel)
4.Prepare all of the lessee’s journal entries for the first, second, and third years (Show all
computations)
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