Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease of equipment that is classified as a sales type lease by the lessor and as a capital lease by the lessee. Assume that the lease payments are made at the beginning of each month, interest and straight line depreciation are recognized at the end of each month, and the residual value of the leased asset is zero at the end of a three year life.
|
Cost of equipment to lessor (Anson Company) |
$50,000 |
|
Initial payment by lessee (Bullard Company) at inception of lease |
2,000 |
|
Present value of remaining 35 payments of $2,000 each discounted at 1% per month |
58,817 |
Required
1. Record the lease (including the initial receipt of $2,000) and the receipt of the second and third installments of $2,000 in the accounts of the Anson Company. Carry computations to the nearest dollar.
2. Record the lease (including the initial payment of $2,000), the payment of the second and third installments of $2,000, and monthly depreciation in the accounts of the Bullard Company. The lessee records the lease obligation at net present value. Carry computations to the nearest dollar.