AC 302 WEEK 7 Exercise 21 Question 6

AC 302 WEEK 7  Exercise 21 Question 6
Crosley Company a machinery dealer leased a machine to Dexter Corporation on January 1 2014 The lease is for an 10 year period and requires equal annual payments of $32,308 at the beginning of each year. The first payment is received on January 1, 2014. Crosley had purchased the machine during 2013 for $161,000. 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 9% 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.
Your answer is correct. 
 	 
Compute the amount of the lease receivable. (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.)
The amount of the lease receivable		$  



 	Your answer is correct. 
 	 
Prepare all necessary journal entries for Crosley for 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 58,971.)
Date	Account Titles and Explanation	Debit	Credit
1/1/14	  
  
  

	  
  
  

	  
  
  

	  
  
  

	(To record the lease.)		
	  
  
  

	  
  
  

	(To record the first lease payment.)		
12/31/14	  
  
  

	  
  
  

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Solution 
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Exercise 21-6
Interest Revenue = [($226,003 - $32,308) x 0.09] = $17,432