Question

Lancer Inc. sells computer systems. Lancer leases computers to XYZ Company on January 1, 2018. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2018; remaining payments at June 30 and December 31 each year through June 30, 2022. Lease term: five years (10 semiannual payments) Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2018: $20 million. What is the outstanding balance of the lease receivable in Lancer’s June 30, 2018, balance sheet?

Answer 1

LANCER INC

LANCER LEASES COMPUTER TO XYZ COMPANY ON JANUARY 1 , 2018

MANUFACTURING COST OF THE COMPUTER = 12 MILLION

NONCANCELABLE HAD THE FOLLOWING TERM

- LEASE PAYMENT- $2,466,754 SEMIANNUALLY

1 PAYMENT AT JANUARY 1 2018 REMAINING PAYMENT AT JUNE 30 AND DECEMBER EACH YEAR THROUGH JUNE 30,2022

DATE	LEASE AMOUNT	LEASE INSTALLMENT	INTEREST	PRINCIPAL
01/01/2018	$20,000,000	$2,466,754		$2,466,754
30/06/2018	$17,553,246	$2,466,754	$87,7,662.3	$1,589,091.7

INTERST = LEASE AMOUNT * INCREMENTAL BORROWING RATE

= $17,553,246 * 5%

= $87,7,662.3

PRINCIPLE AMOUNT = LEASE INSTALELLMENT - INTERST

30/06/2018 = $2,466,754 - $877,662.3

=$1,589,091.7

OUTSTANDING BALANCE ON LEASE LIABILITY ON JUN 30 2018 =LEASE AMOUNT - PRINCIPLE

= $17,553,246 - $1,589,091.7

=$15,964,154.3

OUTSTANDING BALANCE ON LEASE LIABILITY ON JUN 30 2018 =$15,964,154.3