ACCT 557 Intermediate Accounting III – DeVry
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Write My Essay For Me| Kingdom Leasing Inc. agrees to lease jousting equipment to Knight Inc. on Jan 1,2012. They agree on the following terms: | ||||
| 1) The normal selling price of the jousting equipment is $325000 and the cost of the asset to Kingdom Leasing Inc. was $250000. | Fair Value | 325000 | ||
| 2) Knight will pay all maintenance,insurance,and taxes costs directly and annual payments of $60000 on Jan 1 each year. | Residual Value | 30000 | ||
| 3) The lease begins on Jan 1, 2012 and payments will be in equal annual installments. | Lease term | 10 | ||
| 4) The lease is noncancelable with no renewal option. The lease terms is 10 years (the same as the estimated economic life). | Lease payments | 60000 | ||
| 5) At the end of the lease, the jousting ring will revert to Kingdom Leasing Inc. and have an unguaranteed residual value of $30000. Their implicit interest rate is 10%. | manuf cost | 250000 | ||
| 6) Kingdom Leasing, Inc. Incurred costs of $6500 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectibility of the lease payments is reasonably predictable. | lease neg | 6500 | ||
| Required: | PV res value | 11566.2 | ||
| a) Determine what type of lease this would be for the lessor and calculate the following: (show all work) | $ 238,434 | |||
| Lease Receivable | ||||
| Sales Price | ||||
| Cost of Sales | ||||
| b) Prepare Kingdom’s amortization schedule for the lease terms. | ||||
| c) Prepare all the journal entries for Kingdom for 2012. Assume a calendar year fiscal year. | ||||
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