On January 1, Year 1, Manlier Inc. leased equipment costing $45,000 to one of its customers. The sales-type lease agreement specifies six annual payments of $15,000 beginning on that date. The present value of the annual lease payments is $73,619. At the end of the lease, the equipment will be returned to Manlier and is expected to have a residual value of $5,000. The present value of that residual value is $2,822. Complete the appropriate journal entry recorded by Manlier at the beginning of the lease. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole number.)

Question

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DeniceSandidge DeniceSandidge · Answer 1 · 2019-08-09T13:14:07+02:00

Answer:

lease receive = $76441 ( debit entry )

cost of goods sold value = $42178 (debit entry )

equipment cost is = $45,000 ( credit entry )

sales revenue is = $73,619 (credit entry )

Explanation:

Given data

leased equipment costing = $45,000

lease agreement @ six annual payments = $15,000

present value of the annual lease payments = $73,619

residual value = $5,000

present value residual value = $2,822

to find out

journal entry recorded by Manlier at the beginning of the lease

solution

first we calculate lease receive that is debit entry

lease receive = present value of the annual lease payments + present value residual value

lease receive = 73619 + 2822

lease receive = $76441 ( debit entry )

now we calculate cost of goods sold value i.e

cost of goods sold value = leased equipment costing - present value residual value

cost of goods sold value = 4500 - 2822

cost of goods sold value = $42178 (debit entry )

equipment cost is = leased equipment costing = $45,000 ( credit entry )

sales revenue is = present value of the annual lease payments = $73,619 (credit entry )