E21-6
(Lessor Entries, Sales-Type Lease) Crosley Company, a machinery dealer, leased a machine
to Dexter Corporation on January 1, 2014. The lease is for an 8-year period and
requires equal annual payments of $35,013 at the beginning of each year. The
first payment is received on January 1, 2014. Wadkins had purchased the machine
during 2013 for $160,000 Collectibility of lease payments is reasonably
predictable, and no important uncertainties surround the amount of costs yet to
be incurred by Crosley. Crosley set the annual rental to ensure an 11% rate of
return. The machine has an economic life of 10 years with no residual value and
reverts to Crosley at the termination of the lease.
Instructions
(a) Compute
the amount of the lease receivable. (Use the Excel Present Value formula
"=PV(" to solve.)
(b) Prepare all necessary journal entries for Crosley for 2014.
File name: E21-6 Crosley Company.xls File
type: xls PRICE: $5
