Question

Lancer Inc. sells computer systems. Lancer leases computers to XYZ Company on January 1, 2018. The...

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?

Homework Answers

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

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