On January 1, 2020, Wildhorse Leasing Inc., a lessor that uses IFRS 16, signed an agreement...

 

 

 

 

 

 

 

 

Transcribed Image Text:

On January 1, 2020, Wildhorse Leasing Inc., a lessor that uses IFRS 16, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $424,000 and Wildhorse purchased it from Manufacturing Solutions Ltd. specifically for Rock River Inc. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses Wildhorse $4,100 each January 1 for a portion of the repairs and maintenance expenditures, which cost Wildhorse Leasing a total of $6,100 per year. At the end of the 5-year agreement, the compression equipment will revert to Wildhorse and is expected to have a residual value of $25,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Wildhorse Leasing Inc. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Assume that Wildhorse Leasing Inc. has a required rate of return of 11%. Calculate the amount of the lease payments that would be needed to generate this return on the agreement if payments were made each: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) January 1 December 31 The lease payments TABLE PV.1 Present Value of 1 (n) periods 2% 24% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 0.98039 0.97561 0.97087 0.96156 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.90090 0.89286 0.86957 0.96117 0.95181 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.81162 0.79719 0.75614 3 0.94232 0.92860 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 0.77218 0.75132 0.73119 0.71178 0.65752 4 0.92385 0.90595 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.65873 0.63552 0.57175 5 0.90583 0.88385 0.86261 0.82193 0.78353 0.74726 0.71299 0.68058 0.64993 0.62092 0.59345 0.56743 0.49718 0.88797 0.86230 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.53464 0.50663 0.43233 7 0.87056 0.84127 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.37594 8 0.85349 0.82075 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.43393 0.40388 0.32690 9 0.83676 0.80073 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.36061 0.28426 10 0.82035 0.78120 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.24719 11 0.80426 0.76214 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.21494 12 0.78849 0.74356 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 0.35554 0.31863 0.28584 0.25668 0.18691 13 0.77303 0.72542 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.16253 14 0.75788 0.70773 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.14133 15 0.74301 0.69047 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.12289 16 0.72845 0.67362 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.16312 0.10687 PRESENT VALUE OF AN ANNUITY DUE OF 1 1 1- (1+i)"- PVF-AD,=1+- (n) periods 2% 21/2% 3% 4% 5% 6% 8% 9% 10% 11% 12% 15% 1. 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 2 1.98039 1.96154 1.97561 2.92742 1.97087 1.95238 1.94340 1.92593 1.91743 1.90909 1.90090 1.89286 1.86957 3 2.94156 2.91347 2.88609 2.85941 2.83339 2.78326 2.75911 2.73554 2.71252 2.69005 2.62571 4 3.88388 3.85602 3.82861 3.77509 3.72325 3.67301 3.57710 3.53130 3.48685 3.44371 3.40183 3.28323 4.80773 4.76197 4.71710 4.62990 4.54595 4.46511 4.31213 4.23972 4.16986 4.10245 4.03735 3.85498 5.71346 5.64583 5.57971 5.45182 5.32948 5.21236 4.99271 4.88965 4.79079 4.69590 4.60478 4.35216 6.60143 6.50813 6.41719 6.24214 6.07569 5.91732 6.58238 5.62288 5.48592 5.35526 5.23054 5.11141 4.78448 8. 7.47199 7.34939 7.23028 7.00205 6.78637 6.20637 6.03295 5.86842 5.71220 5.56376 5.16042 9. 8.32548 8.17014 8.01969 7.73274 7.46321 7.20979 6.74664 6.53482 6.33493 6.14612 5.96764 5.48732 10 9.16224 8.97087 8.78611 8.43533 8.10782 7.80169 7.24689 6.99525 6.75902 6.53705 6.32825 5.77158 11 9.98259 9.75206 9.53020 9.11090 8.72173 8.36009 7.71008 7.41766 7.14457 6.88923 6.65022 6.01877 12 10.78685 10.51421 10.25262 9.76048 9.30641 8.88687 8.13896 7.80519 7.49506 7.20652 6.93770 6.23371 13 11.57534 11.25776 10.95400 10.38507 9.86325 9.38384 8.53608 8.16073 7.81369 7.49236 7.19437 6.42062 14 12.34837 11.98319 11.63496 10.98565 10.39357 12.29607 9.85268 8.90378 8.48690 8.10336 7.74987 7.42355 6.58315 15 13.10625 12.69091 11.56312 10.89864 10.29498 9.24424 8.78615 9.36669 7.98187 7.62817 6.72448 9.55948 9.85137 16 13.84926 13.38138 12.93794 12.11839 11.37966 10.71225 9.06069 8.60608 8.19087 7.81086 6.84737 17 14.57771 14.05500 13.56110 12.65230 11.83777 11.10590 9.31256 8.82371 8.37916 7.97399 6.95424 18 15.29187 14.71220 14.16612 13.16567 12.27407 11.47726 10.12164 9.54363 9.02155 8.54879 8.11963 7.04716 19 15.99203 15.35336 14.75351 13.65930 12.68959 11.82760 10.37189 9.75563 9.20141 8.70162 8.24967 7.12797 20 16.67846 15.97889 15.32380 14.13394 13.08532 12.15812 10.60360 9.95012 9.36492 8.83929 8.36578 7.19823 21 14.59033 13.46221 17.35143 16.58916 18.01121 15.87747 12.46992 10.81815 10.12855 9.51356 8.96333 8.46944 7.25933 22 17.18455 16.41502 15.02916 13.82115 12.76408 11.01680 10.29224 9.64869 9.07507 8.56200 7.31246 23 18.65805 17.76541 16.93692 15.45112 14.16300 13.04158 11.20074 10.44243 9.77154 9.17574 8.64465 7.35866 Prepare an amortization schedule that shows how the lessor's net investment in the lease receivable will be reduced over the lease term if payments are made each January 1. (Round answers to 0 decimal places, e.g. 5,275.) Wildhorse Leasing Inc., (Lessor) Lease Amortization Schedule Interest on Net Investment Annual Lease Balance Net Investment Payment Plus URV Date of Net Recovery Investment Jan. 1, 2020 Jan. 1, 2020 Jan. 1, 2021 Jan. 1, 2022 Jan. 1, 2023 Jan. 1, 2024 Jan. 1, 2025 Prepare an amortization schedule that shows how the lessor's net investment in the lease receivable will be reduced over the lease term if payments are made each December 31. (Round answers to 0 decimal places, e.g. 5,275.) Wildhorse Leasing Inc., (Lessor) Lease Amortization Schedule Annual Lease Balance Net Investment Interest Date on Net of Net Payment Plus URV Investment Recovery Investment Jan. 1, 2020 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2024 Dec. 31, 2024 Assume that the payments are due each January 1. Prepare all journal entries and adjusting journal entries for 2020 and 2021 for the lessor, assuming that Wildhorse has a calendar year end. Include the payment for the purchase of the equipment for leasing in your entries and the annual payment for repair and maintenance. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record purchase of equipment.) 1/1/20 (To record lease.) (To record annual repairs and maintenance payment.) (Collection of lease payment.) (To record annual repairs and maintenance payment.) (To record interest.) Prepare a partial statement of financial position at December 31, 2020, showing the net investment in leases for Wildhorse. Provide the proper classification and assume that the payments are due each January 1. (Round answers to 0 decimal places, e.g. 5,275.) wildhorse Leasing Inc. Statement of Financial Position (Partial) 241 Balance On January 1, 2020, Wildhorse Leasing Inc., a lessor that uses IFRS 16, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $424,000 and Wildhorse purchased it from Manufacturing Solutions Ltd. specifically for Rock River Inc. Annual payments are made each January 1 by Rock River. In addition to making the lease payment, Rock River also reimburses Wildhorse $4,100 each January 1 for a portion of the repairs and maintenance expenditures, which cost Wildhorse Leasing a total of $6,100 per year. At the end of the 5-year agreement, the compression equipment will revert to Wildhorse and is expected to have a residual value of $25,200, which is not guaranteed. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by Wildhorse Leasing Inc. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Assume that Wildhorse Leasing Inc. has a required rate of return of 11%. Calculate the amount of the lease payments that would be needed to generate this return on the agreement if payments were made each: (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) January 1 December 31 The lease payments TABLE PV.1 Present Value of 1 (n) periods 2% 24% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 15% 1 0.98039 0.97561 0.97087 0.96156 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.90090 0.89286 0.86957 0.96117 0.95181 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.81162 0.79719 0.75614 3 0.94232 0.92860 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 0.77218 0.75132 0.73119 0.71178 0.65752 4 0.92385 0.90595 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.65873 0.63552 0.57175 5 0.90583 0.88385 0.86261 0.82193 0.78353 0.74726 0.71299 0.68058 0.64993 0.62092 0.59345 0.56743 0.49718 0.88797 0.86230 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.53464 0.50663 0.43233 7 0.87056 0.84127 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51316 0.48166 0.45235 0.37594 8 0.85349 0.82075 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.43393 0.40388 0.32690 9 0.83676 0.80073 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 0.46043 0.42410 0.39092 0.36061 0.28426 10 0.82035 0.78120 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.35218 0.32197 0.24719 11 0.80426 0.76214 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.31728 0.28748 0.21494 12 0.78849 0.74356 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 0.35554 0.31863 0.28584 0.25668 0.18691 13 0.77303 0.72542 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.25751 0.22917 0.16253 14 0.75788 0.70773 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.23199 0.20462 0.14133 15 0.74301 0.69047 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.20900 0.18270 0.12289 16 0.72845 0.67362 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 0.25187 0.21763 0.18829 0.16312 0.10687 PRESENT VALUE OF AN ANNUITY DUE OF 1 1 1- (1+i)"- PVF-AD,=1+- (n) periods 2% 21/2% 3% 4% 5% 6% 8% 9% 10% 11% 12% 15% 1. 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 2 1.98039 1.96154 1.97561 2.92742 1.97087 1.95238 1.94340 1.92593 1.91743 1.90909 1.90090 1.89286 1.86957 3 2.94156 2.91347 2.88609 2.85941 2.83339 2.78326 2.75911 2.73554 2.71252 2.69005 2.62571 4 3.88388 3.85602 3.82861 3.77509 3.72325 3.67301 3.57710 3.53130 3.48685 3.44371 3.40183 3.28323 4.80773 4.76197 4.71710 4.62990 4.54595 4.46511 4.31213 4.23972 4.16986 4.10245 4.03735 3.85498 5.71346 5.64583 5.57971 5.45182 5.32948 5.21236 4.99271 4.88965 4.79079 4.69590 4.60478 4.35216 6.60143 6.50813 6.41719 6.24214 6.07569 5.91732 6.58238 5.62288 5.48592 5.35526 5.23054 5.11141 4.78448 8. 7.47199 7.34939 7.23028 7.00205 6.78637 6.20637 6.03295 5.86842 5.71220 5.56376 5.16042 9. 8.32548 8.17014 8.01969 7.73274 7.46321 7.20979 6.74664 6.53482 6.33493 6.14612 5.96764 5.48732 10 9.16224 8.97087 8.78611 8.43533 8.10782 7.80169 7.24689 6.99525 6.75902 6.53705 6.32825 5.77158 11 9.98259 9.75206 9.53020 9.11090 8.72173 8.36009 7.71008 7.41766 7.14457 6.88923 6.65022 6.01877 12 10.78685 10.51421 10.25262 9.76048 9.30641 8.88687 8.13896 7.80519 7.49506 7.20652 6.93770 6.23371 13 11.57534 11.25776 10.95400 10.38507 9.86325 9.38384 8.53608 8.16073 7.81369 7.49236 7.19437 6.42062 14 12.34837 11.98319 11.63496 10.98565 10.39357 12.29607 9.85268 8.90378 8.48690 8.10336 7.74987 7.42355 6.58315 15 13.10625 12.69091 11.56312 10.89864 10.29498 9.24424 8.78615 9.36669 7.98187 7.62817 6.72448 9.55948 9.85137 16 13.84926 13.38138 12.93794 12.11839 11.37966 10.71225 9.06069 8.60608 8.19087 7.81086 6.84737 17 14.57771 14.05500 13.56110 12.65230 11.83777 11.10590 9.31256 8.82371 8.37916 7.97399 6.95424 18 15.29187 14.71220 14.16612 13.16567 12.27407 11.47726 10.12164 9.54363 9.02155 8.54879 8.11963 7.04716 19 15.99203 15.35336 14.75351 13.65930 12.68959 11.82760 10.37189 9.75563 9.20141 8.70162 8.24967 7.12797 20 16.67846 15.97889 15.32380 14.13394 13.08532 12.15812 10.60360 9.95012 9.36492 8.83929 8.36578 7.19823 21 14.59033 13.46221 17.35143 16.58916 18.01121 15.87747 12.46992 10.81815 10.12855 9.51356 8.96333 8.46944 7.25933 22 17.18455 16.41502 15.02916 13.82115 12.76408 11.01680 10.29224 9.64869 9.07507 8.56200 7.31246 23 18.65805 17.76541 16.93692 15.45112 14.16300 13.04158 11.20074 10.44243 9.77154 9.17574 8.64465 7.35866 Prepare an amortization schedule that shows how the lessor's net investment in the lease receivable will be reduced over the lease term if payments are made each January 1. (Round answers to 0 decimal places, e.g. 5,275.) Wildhorse Leasing Inc., (Lessor) Lease Amortization Schedule Interest on Net Investment Annual Lease Balance Net Investment Payment Plus URV Date of Net Recovery Investment Jan. 1, 2020 Jan. 1, 2020 Jan. 1, 2021 Jan. 1, 2022 Jan. 1, 2023 Jan. 1, 2024 Jan. 1, 2025 Prepare an amortization schedule that shows how the lessor's net investment in the lease receivable will be reduced over the lease term if payments are made each December 31. (Round answers to 0 decimal places, e.g. 5,275.) Wildhorse Leasing Inc., (Lessor) Lease Amortization Schedule Annual Lease Balance Net Investment Interest Date on Net of Net Payment Plus URV Investment Recovery Investment Jan. 1, 2020 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2024 Dec. 31, 2024 Assume that the payments are due each January 1. Prepare all journal entries and adjusting journal entries for 2020 and 2021 for the lessor, assuming that Wildhorse has a calendar year end. Include the payment for the purchase of the equipment for leasing in your entries and the annual payment for repair and maintenance. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record purchase of equipment.) 1/1/20 (To record lease.) (To record annual repairs and maintenance payment.) (Collection of lease payment.) (To record annual repairs and maintenance payment.) (To record interest.) Prepare a partial statement of financial position at December 31, 2020, showing the net investment in leases for Wildhorse. Provide the proper classification and assume that the payments are due each January 1. (Round answers to 0 decimal places, e.g. 5,275.) wildhorse Leasing Inc. Statement of Financial Position (Partial) 241 Balance