Question

Exercise 21A-8 a-d Ivanhoe Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2017. The lease is for an 8-year period and requires equal annual payments of $30,992 at the beginning of each year. The first payment is received on January 1, 2017. Ivanhoe had purchased the machine during 2016 for $142,000. Collectibility of lease payments by Ivanhoe is probable. Ivanhoe set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Ivanhoe at the termination of the lease. Click here to view the factor table. Incorrect answer. Your answer is incorrect. Try again. Compute the amount of the lease receivable. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Amount of the lease receivable $Entry field with incorrect answer 356028 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Prepare all necessary journal entries for Ivanhoe for 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record the lease) Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer (To record the first lease payment) 12/31/17 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Suppose the collectibility of the lease payments was not probable for Ivanhoe. Prepare the necessary journal entry for the company in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/17 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Suppose at the end of the lease term, Ivanhoe receives the asset and determines that it actually has a fair value of $1,080 instead of the anticipated residual value of $0. Record the entry to recognize the receipt of the asset for Ivanhoe at the end of the lease term. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Entry field with incorrect answer now contains modified data Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer

Answer 1

Part A

The amount of the lease receivable = $30992 x PVIFA(6%,8) = $30992 x 6.5824 = 204001.7 = $204002

Part B

1/1/17	Lease Receivable	204002
	Cost of Goods Sold	142000
	Sales Revenue		204002
	Inventory		142000
	(To record the lease)
1/1/17	Cash	30992
	Lease Receivable		30992
	(To record the first lease payment)
12/31/17	Interest Receivable	10381
	Interest Revenue (204002-30992)*6%		10381
	(to record interest)