Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. • Universal earns interest under these arrangements at a 8% annual rate. • The company leased an electronic typesetting machine it purchased for $38,000 to a local publisher, Desktop Incorporated, on December 31, 2023. The lease contract specified annual payments of $8,348 beginning January 1, 2024, the beginning of the lease, and each December 31 through 2025 (three-year lease term). The publisher had the option to purchase the machine on December 30, 2026, the end of the lease term, for $18,600 when it was expected to have a residual value of $22,600, a sufficient difference that exercise seems reasonably certain. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Show how Universal calculated the $8,348 annual lease payments for this sales-type lease. 2. Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over the lease term. 3. Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of the lease term
Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. • Universal earns interest under these arrangements at a 8% annual rate. • The company leased an electronic typesetting machine it purchased for $38,000 to a local publisher, Desktop Incorporated, on December 31, 2023. The lease contract specified annual payments of $8,348 beginning January 1, 2024, the beginning of the lease, and each December 31 through 2025 (three-year lease term). The publisher had the option to purchase the machine on December 30, 2026, the end of the lease term, for $18,600 when it was expected to have a residual value of $22,600, a sufficient difference that exercise seems reasonably certain. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Show how Universal calculated the $8,348 annual lease payments for this sales-type lease. 2. Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over the lease term. 3. Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of the lease term
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 6E: Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on...
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