BUS $203-$ Test IV

$-7-$

SECTION III

$40$ Points

On January $1,2025,$ Rider Inc. leased a truck to Pine Valley Transportation. The lease qualifies as a finance lease under criteria established by the accounting profession. The following information relates to this agreement:

The lease term is for ten years. The fair value of the truck on the date of the lease is $$70,000,$ the useful life of the truck is $15$ years.

The lease agreement specifies that asset be returned to Rider at the end of the lease term. There is no bargain purchase option in the lease.

Lease payments are $$8,800$ per year with the first payment due January $1,2025.$

Pine Valley's incremental borrowing rate is $8\%.$ The lessor's implicit rate is $6\%$ and is known to Pine Valley the lessee.

Maintenance costs of $$900($executory costs that are not included in the lease payments$)$ were incurred and paid on June $1,2025,$ and June $1,2026,$ by Pine Valley.

Pine Valley uses straight$-$line depreciation $($amortization$)$ on all its assets.

The present value factors for an annuity due are as follows:

$\backslash$table$[[8\%,7\mathrm{.}24689],[6\%,7\mathrm{.}80169]]$

Instructions

Complete the lease amortization schedule below through $\frac{1}{1}\frac{?}{28}.($Round all answers to the nearest dollar$)$

Provide all necessary journal entries required of Pine Valley for the years $2025$ and $2026.$

Show all your work.

$\backslash$table$[[$Date$,$Lease Payment,Interest,Lease Reduction,Lease Liability Balance$],[1/1/25,,,,],[,,,,],[,,,,],[,,,,],[,,,,],[,,,,],[,,,,]]$

SECTION II

Worksheet

$\backslash$table$[[$Date$,$Account Titles and Explanation,Dr$.,$Cr $.],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]$