Question: cam you please show me how to work this problem. Q2. On December 31, 2018, Vegas Corp. (the lessor) leases equipment to Magnus (the lessee).

 cam you please show me how to work this problem. Q2.

cam you please show me how to work this problem.

Q2. On December 31, 2018, Vegas Corp. (the lessor) leases equipment to Magnus (the lessee). The first lease payment is at the inception of the lease (12/31/2018), followed by four additional year-end lease payments (2019 through 2022). The lessor and lessee have a December 31 fiscal year end. The lease qualifies as a financing lease (sales type). Other important facts about the lease follow: Inception of the lease Annual payments Expected RV at EOL (probable residual value) Guaranteed RV at EOL (guaranteed residual value) Lease term (years) Economic life of leased equipment (years) Lessor's cost for the leased asset 12/31/2018 $1,500 1,000 2,300 5 9 $6,388 S6,758 Using an appropriate 5.5% interest rate, the following present values were calculated: PV of five annual lease payments PV of the $1,000 expected residual value $765 PV of $2,300 guaranteed residual value $1,760 Q2. (a) and (b). Assume the lessee agreed to the residual value guarantee shown in the table above. a. What should the lessee report as annual amortization of the leased asset? Calculations: b. Make all journal entries for the lessor for 2018 and 2019. Show supporting calculations. 12/31/2018 12/31/2019 Q2. (c) Now assume that the lessee did NOT provide the $2,300 residual value guarantee. All other facts are unchanged. Repeat all journal entries for the lessor for 2018 and 2019. Date the entries. Show supporting calculations. 12/31/2018 12/31/2019

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!