Baxter Company is a manufacturer of various types of farming equipment. Baxter then sells or leases...

 

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Baxter Company is a manufacturer of various types of farming equipment. Baxter then sells or leases the equipmment through online platforms. On 1/1/20, Baxter leased a combine harvester to Tarallo Farms. Data relating to the lease follow: Cost of equipment to Baxter $235,000 $290,000 Fair market value of equipment at 1/1/20 Useful life of equipment 8 years Lease term 5 years Residual value at the end of the lease (guaranteed by Tarallo) $30,000 Residual value expected by Tarallo $20,000 Implicit and incremental interest rates 6% Initial direct costs incurred by Tarallo in negotiation $10,000 Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31. Required: a. Calculate the yearly payment that Baxter will charge Tarallo under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20. b. Prepare all journal entries that would be made by Baxter (lessor) during 2020 and 2021 relating to this lease. C. Prepare all journal entries that would be made by Tarallo (lessee) during 2020 and 2021 relating to this lease. d. Prepare the journal entries made by both Baxter and Tarallo with respect to the lease termination if the actual residual value of the computer equipment is $25,000. Baxter Company is a manufacturer of various types of farming equipment. Baxter then sells or leases the equipmment through online platforms. On 1/1/20, Baxter leased a combine harvester to Tarallo Farms. Data relating to the lease follow: Cost of equipment to Baxter $235,000 $290,000 Fair market value of equipment at 1/1/20 Useful life of equipment 8 years Lease term 5 years Residual value at the end of the lease (guaranteed by Tarallo) $30,000 Residual value expected by Tarallo $20,000 Implicit and incremental interest rates 6% Initial direct costs incurred by Tarallo in negotiation $10,000 Both the lessor and lessee use straight-line depreciation and have accounting periods that end on 12/31. Required: a. Calculate the yearly payment that Baxter will charge Tarallo under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/20. b. Prepare all journal entries that would be made by Baxter (lessor) during 2020 and 2021 relating to this lease. C. Prepare all journal entries that would be made by Tarallo (lessee) during 2020 and 2021 relating to this lease. d. Prepare the journal entries made by both Baxter and Tarallo with respect to the lease termination if the actual residual value of the computer equipment is $25,000.

Answer rating: 100% (QA)

a 235000614100 51410070500 b Baxter Lessor Journal Entries 1120 Lease equipment to Tarallo Farms Equ... View the full answer