Name Group 4

Section C
Date 4/15/2021 Glaus Leasing Company aqnd Jensen Corporation

(a) - (c)
(a)
1 Lessee
2 Lessee here is Jensen's side. This type of lease is included in the financial lease because the
3 proportion of the lease term to the asset's economic life exceeds 75%, namely 78%, obtained
4 from 7 lease terms divided by 9 assets's economic life in times 100.
5
6 Lessor
7 The lessor here is the Glaus leasing company. From their side, this lease is included in the
8 financial lease because the proportion of the lease term exceeds 75%. This dam lease includes
9 sales because the fair value lease exceeds the lessor's cost.
10
11 (b) Annual lease payment = $ 109,364.65
12 $ 35,534 6.0756920673
13
14 (c) Lease liabily = $ 664,465.93
15

(d) & (e)

Account Titles Debit

1 (d) 1/1/22
2 Right of use asset $ 664,466
3 Lease liability
4 Lease liability $ 109,365
5 Cash
6 12/31/23
7 Interest expense $ 27,755
8 Interest payable
9 Amortization expense $ 94,924
10 Right of use asset
11 1/1/23
12 Lease liability $ 81,610
13 Interest payable $ 27,755
14 Cash

1
 Problem 21.6

pany aqnd Jensen Corporation

1
2
3
4
5
6
7
8
9
10
11 Data 700000 525000 7
12 9 50000 5% 6%
13
14 Date Annual lease payment Lease interest Lease Reduction
15 1/1/2022
1/1/2022 $109,365 $0 $109,365
1/1/2023 $109,365 $29,532 $79,833
1/1/2024 $109,365 $25,540 $83,825
1/1/2025 $109,365 $21,349 $88,016
Credit 1/1/2026 $109,365 $16,948 $92,417
1 1/1/2027 $109,365 $12,327 $97,037
2 1/1/2028 $109,365 $7,475 $101,889
$ 664,466 3 1/2/2029 $50,000 $2,381 $47,619
4
$ 109,365 5
6 Date Annual lease payment Lease interest Lease Reduction
7 1/1/2022
$ 27,755 8 1/1/2022 $109,365 $0 $109,365
9 1/1/2023 $109,365 $27,755 $81,610
$ 94,924 10 1/1/2024 $109,365 $23,675 $85,690
11 1/1/2025 $109,365 $19,390 $89,975
12 1/1/2026 $109,365 $14,891 $94,473
13 1/1/2027 $109,365 $10,168 $99,197
$ 109,365 14 1/1/2028 $109,365 $5,208 $104,157

2
Lease Receivable
700000
$590,635
$510,802
$426,978
$338,962
$246,546
$149,508
$47,619
$0

Lease Payable
$664,466
$555,101
$473,492
$387,802
$297,827
$203,354
$104,157
$0

3
Name Group 5 Problem 21.6 Conclud
Section C
Date 4/15/2021 Glaus Leasing Company aqnd Jensen Corporati

(d) and (e) (Continued)

Account Titles Debit

1 (d) 12/31/23
2 Interest expense $ 23,675
3 Interest payable
4 Amortization expense $ 94,924
5 Right of use asset
6 (e) 1/1/22
7 Lease receivable $ 700,000
8 Sales revenue
9 Cost of goods sold $ 525,000
10 Inventory
11 Cash $ 109,365
12 Lease receivable
13 12/31/22
14 Interest receivable $ 29,532
15 Interest revenue
16 1/1/23
17 Cash $ 109,365
18 Interest receivable
19 Lease receivable
20 12/31/23
21 Interest receivable $ 29,532
22 Interest revenue

(f)

1 Lease liability if lease end term is 40000 $ 110,534

2 PV residual value $ 28,427
3 PV annual lease payment 6.0756920673
4 Annual payment $ 110,534

4
 Problem 21.6 Concluded

sing Company aqnd Jensen Corporation

Credit
1
2
$ 23,675 3
4
$ 94,924 5
6
7
$ 700,000 8
9
$ 525,000 10
11
$ 109,365 12
13
14
$ 29,532 15
16
17
$ 29,532 18
$ 79,833 19
20
21
$ 29,532 22

1
2
3
4

5
Name Group 5 Problem 21.7
Section C
Date 4/14/2021 Amirante Inc.

(a)

1 The noncancelable lease is a sales-type lease because : 1

2 1) the lease tem is for 83% )10/12of the economic life of the leased asset, and 2
3 (2) the present value of the lease payments exceeds 90% of the fair value of leased property 3
4 4
5 1. Lease Receivable : 5
6 Present value of annual payments of 60,000 made at the beginning of each 6
7 period for 10 years (60,000 x 8.10782) $ 486,469 7
8 Present value of guaranteed residual value (15,000 x .61391) $ 9,209 8
9 Present value of lease payments (486,469 + 9,209) $ 495,678 9
10 10
11 2. Sales price is the same as the presents value of lease payments $ 495,678 11
12 12
13 3. Cost of sales is the cost of manufacturing the x-ray machine $ 300,000 13
14 14

(b)
AMIRANTE INC. (Lessor)
Lease Amortization Schedule
Annuity Due Basis, Guaranteed Residual Value
1 Annual Lease Interest (5%) Recovery of 1
2 Beginning Payment Plus on Lease Lease Lease 2
3 of Year Residual Value Receivable Receivable Receivable 3
4 Initial PV $ 495,678 4
5 1 $ 60,000 $ - $ 60,000 $ 435,678 5
6 2 $ 60,000 $ 21,784 $ 38,216 $ 397,462 6
7 3 $ 60,000 $ 19,873 $ 40,127 $ 357,335 7
8 4 $ 60,000 $ 17,867 $ 42,133 $ 315,202 8
9 5 $ 60,000 $ 15,760 $ 44,240 $ 270,962 9
10 6 $ 60,000 $ 13,548 $ 46,452 $ 224,510 10
11 7 $ 60,000 $ 11,225 $ 48,775 $ 175,735 11
12 8 $ 60,000 $ 8,787 $ 51,213 $ 124,522 12
13 9 $ 60,000 $ 6,226 $ 53,774 $ 70,748 13
14 10 $ 60,000 $ 3,537 $ 56,463 $ 14,285 14
15 End of 10 $ 15,000 $ 714 $ 14,286 $ (0) 15
16 $ 615,000 $ 119,322 $ 495,678 16

6
Name Group 5 Problem 21.7 Concluded
Section C
Date 4/14/2021 Amirante Inc.

(c) Lessor's journal entries

Account Titles Debit Credit

1 Beginning of the Year 1
2 Lease Receivable $ 495,678 2
3 Cost of Good Sold $ 300,000 3
4 Sales revenue $ 495,678 4
5 Inventory $ 300,000 5
6 Selling expense $ 14,000 6
7 Accounts payable/Cash $ 14,000 7
8 Cash $ 60,000 8
9 Lease Receivable $ 60,000 9
10 End of the Year 10
11 Lease Receivable $ - 11
12 Interest revenue $ - 12
13 13
14 14
15 15
16 16
17 17
18 18
19 19
20 20
21 21

7
Name Group 5 Problem 21.12
Section C
Date 4/14/2021 Winston Industries and Ewing Inc.

(a)

1 The lease should be treated as a sales-type lease by Ewing. The lease qualifies because:
2 (1) title to the engines transfers to the lease,
3 (2) the lease term is equal to the estimeated life of the asset, and
4 (3) the present value of the minimum lease payments exceeds 90% of the fair value of the lease
5 engines. In addition the engines are specially built for the lease
6 Present value of lease payments
7 384,532 x 7.80169 $ 3,000,000
8 Dealer profit
9 Sales $ 3,000,000
10 Less: Cost of engines $ 2,600,000
11 Profit on sale= $ 400,000

(b)

Date Account Titles Debit Credit

1 1/1/20 Lessee
2 Right-of-use asset $ 3,000,000
3 Lease liability $ 3,000,000
4
5 (c) Lessor
6 1/1/20 Lease receivable $ 3,000,000
7 Cost of good sold $ 400,000
8 Sales revenue $ 3,000,000
9 Inventory $ 400,000
10
11 (d) Lessee
12 1/1/20 Lease liability $ 384,532
13 Cash $ 384,532
14
15 Lessor
16 1/1/20 Cash $ 384,532
17 Lease liability $ 384,532

8
roblem 21.12

nd Ewing Inc.

1
2
3
4
5
6
7
8
9
10
11

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

9
Name Group 5 Problem 21.12 continued
Section C
Date 4/14/2021 Winston Industries and Ewing Inc.

(e)
WINSTON INDUSTRIES and EWING INCORPORATED
Lease Amortization Schedule
1 Annual Interest (6%) Reduction of Lease 1
2 Receipt/ on Receivable/ Receivable/ Receivable/ 2
3 Date Payment Liability Liability Liability 3
4 1/1/20 $ 3,000,000 4
5 1/1/20 $ 384,532 $ - $ 384,532 $ 2,615,468 5
6 1/1/21 $ 384,532 $ 156,928 $ 227,604 $ 2,387,864 6
7 1/1/22 $ 384,532 $ 143,272 $ 241,260 $ 2,146,604 7
8 8

Date Account Titles Debit Credit

1 12/31/20 Lessee 1
2 Interest Expense $ 156,928 2
3 Lease liability $ 156,928 3
4 Depreciation expense $ 300,000 4
5 Right of use asset $ 300,000 5
6 6
7 12/31/20 Lessor 7
8 Lease receibvable $ 156,928 8
9 Interest revenue $ 156,928 9
10 10

(f) Lessee
WINSTON INDUSTRIES
Balance Sheet (Partial)
December 31, 2020
1 Assets 1
2 Right of use asset $ 2,700,000 2
3 3
4 Liabilities 4
5 Lease liability $ 384,532 5
6 Long-term lease liability $ 2,387,864 6
7 7
8 Lease liability $ 384,532 8
9 Cash $ 384,532 9

10
Name Group 5 Problem 21.12 concluded
Section C
Date 4/14/2021 Winston Industries and Ewing Inc.

(f) (Continued) Lessor

WINSTON INDUSTRIES
Balance Sheet (Partial)
December 31, 2020
1 Assets
2 Current asset :
3 Lease receivable $ 384,532
4 Non-current assets :
5 Lease receivable $ 2,387,864
6

(g)

3 Right-of-use asset
4 Cash $ 20,000
5 Lease liability $ 3,000,000
6 Legal fees incurred in connection with a lease are considereed initial direct cost of the lease, and
7 should be capitalized as part of the right if use asset.

11
12 concluded

nd Ewing Inc.

1
2
3
4
5
6

3
4
5
6
7

12