Markus Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/20, Markus leased a complete computer system to Bellis Enterprises. Data relating to the lease follow: Cost of equipment to Markus $72,000 Fair market value of equipment at 1/1/20 $95,000 Useful life of equipment 8 years Lease term 5 years Residual value at the end of the lease (guaranteed by Bellis) $12,000 Residual value expected by Bellis $9,000 Implicit and incremental interest rates 8% Initial direct costs incurred by Bellis in negotiation $2,000 Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31. Required: a. Calculate the yearly payment that Markus will charge Bellis under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20. b. Prepare all journal entries that would be made by Markus (lessor) during 2020 and 2021 relating to this lease. c. Prepare all journal entries that would be made by Bellis (lessee) during 2020 and 2021 relating to this lease. d. Prepare the journal entries made by both Markus and Bellis with respect to the lease termination if the actual residual value of the computer equipment is $10,000

Markus Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/20, Markus leased a complete computer system to Bellis Enterprises. Data relating to the lease follow: Cost of equipment to Markus $72,000 Fair market value of equipment at 1/1/20 $95,000 Useful life of equipment 8 years Lease term 5 years Residual value at the end of the lease (guaranteed by Bellis) $12,000 Residual value expected by Bellis $9,000 Implicit and incremental interest rates 8% Initial direct costs incurred by Bellis in negotiation $2,000 Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31. Required: a. Calculate the yearly payment that Markus will charge Bellis under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20. b. Prepare all journal entries that would be made by Markus (lessor) during 2020 and 2021 relating to this lease. c. Prepare all journal entries that would be made by Bellis (lessee) during 2020 and 2021 relating to this lease. d. Prepare the journal entries made by both Markus and Bellis with respect to the lease termination if the actual residual value of the computer equipment is $10,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...

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Markus Computer Company manufactures and sells or leases various types of computer equipment. On 1/1/20, Markus leased a complete
computer system to Bellis Enterprises. Data relating to the lease follow:

       Cost of equipment to Markus               $72,000
       Fair market value of equipment at 1/1/20               $95,000
       Useful life of equipment               8 years
       Lease term               5 years
       Residual value at the end of the lease
       (guaranteed by Bellis)               $12,000
       Residual value expected by Bellis               $9,000
       Implicit and incremental interest rates               8%
       Initial direct costs incurred by Bellis in negotiation               $2,000

Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31.

Required:
a.      Calculate the yearly payment that Markus will charge Bellis under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20.


b. Prepare all journal entries that would be made by Markus (lessor) during 2020 and 2021 relating to this lease.


c. Prepare all journal entries that would be made by Bellis (lessee) during 2020 and 2021 relating to this lease.


d. Prepare the journal entries made by both Markus and Bellis with respect to the lease termination if the actual residual value
   of the computer equipment is $10,000.

Answer all subparts.if answered within 1hr,it would be helpful.pls asap

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