Homework

HW Ch. 15 i Saved Help Save & Exit Submit Check my work 5 Rhone-Metro Industries manufactures equipment that is sold or leased. On December 31, 2021, Rhone-Metro leased equipment to Western Soya Co. for a four-year period ending December 31, 2025, at which time possession of the leased asset will revert back to Rhone-Metro. The equipment cost $600,000 to manufacture and has an expected useful life of six years. Its normal sales price is $653,343. The expected residual value of $25,000 at December 31, 2025, is not guaranteed. Equal payments under the lease are 10 $183,000 (including $3,000 maintenance costs) and are due on December 31 of each year. The first payment was made on December points 31, 2021. Western Soya's incremental borrowing rate is 10%. Western Soya knows the interest rate implicit in the lease payments is 9%. Both companies use straight-line depreciation. (FV of $1, PV of $1, EVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Book Required: 1. Show how Rhone-Metro calculated the $183,000 annual lease payments. Print 2. How should this lease be classified (a) by Western Soya Co. (the lessee) and (b) by Rhone-Metro Industries (the lessor)? 3. Prepare the appropriate entries for both Western Soya Co. and Rhone-Metro on December 31, 2021. 4. Prepare an amortization schedule(s) describing the pattern of interest over the lease term for the lessee and the lessor. 5. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2022 (the second lease payment and References amortization). 6. Prepare the appropriate entries for both Western Soya and Rhone-Metro on December 31, 2025, assuming the equipment is returned to Rhone-Metro and the actual residual value on that date is $1,000. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 3 3 Required 4 Required 4 Required 5 Required 5 Required 6 Required 6 Lessee Lessor Lessee Lessor Lessee Lessor Lessee Lessor Show how Rhone-Metro calculated the $183,000 annual lease payments. (Round your intermediate and final answers to nearest whole dollar.) Unguaranteed Residual Value Table or calculator function: PV of $1 n = i= 12% Present Value Amount to be recovered 653,343 Less: Present value of the unguaranteed residual value Amount to be recovered through periodic lease payments Lease Payments Table or calculator function Graw Hill