Sandhill Company, a machinery

Sandhill Company, a machinery dealer, leased a machine to DexterCorporation on January 1, 2020. The lease is for an 8-year periodand requires equal annual payments of $30,232 at the beginning ofeach year. The first payment is received on January 1, 2020.Sandhill had purchased the machine during 2016 for $105,000.Collectibility of lease payments by Sandhill is probable. Sandhillset the annual rental to ensure a 6% rate of return. The machinehas an economic life of 10 years with no residual value and revertsto Sandhill at the termination of the lease.

Compute the amount of the lease receivable. (Forcalculation purposes, use 5 decimal places as displayed in thefactor table provided and round final answer to 0 decimal placese.g. 5,275.)

Amount of the lease receivable

$enter a dollar amount of the lease receivable rounded to 0decimal places

Prepare all necessary journal entries for Sandhill for 2020.(Credit account titles are automatically indented whenamount is entered. Do not indent manually. Round answers to 0decimal places e.g. 5,275.)

Suppose the collectibility of the lease payments was notprobable for Sandhill. Prepare the necessary journal entry for thecompany in 2020. (Credit account titles areautomatically indented when amount is entered. Do not indentmanually.)

Suppose at the end of the lease term, Sandhill receives theasset and determines that it actually has a fair value of $1,190instead of the anticipated residual value of $0. Record the entryto recognize the receipt of the asset for Sandhill at the end ofthe lease term. (Credit account titles areautomatically indented when amount is entered. Do not indentmanually. Round answers to 0 decimal places e.g.5,275.)

Answer:

Answer :-

The amount of the lease receivable are as follows:-

In the question it was given that The lease is for an 8-yearperiod and requires equal annual payments of $30,232 at thebeginning of each year. So there is 8 installment of annualpayment.And Sandhill set the annual rental to ensure a 6% rate ofreturn . Therefore,PV factor = 6% rate of return.

Therefore,

Amount of lease receivable = $198,999.

Necessary journal entries for Sandhill for 2020 are as follows:-

Date Account Titles and Explanation Debit Credit
1/1/20 Lease receivable A/c Dr. $198,999
Cost of goods sold A/c Dr. $105,000
To Sales A/c $198,999
To Inventory A/c $105,000
(To record the lease)
Cash A/c Dr. $30,232
To Lease receivable A/c $30,232
(To record the first lease payment)
12/31/20 Interest receivable A/c Dr. $10,126

To Interest revenue A/c

[($198,999 – $30,232) × 6% rate]

$10,126

(To record interest receivable for 2020)

The collectibility of the lease payments was not probable forSandhill. Prepare the necessary journal entry for the company in2020 –

1/1/2020 Cash A/c Dr. $30,232
To Deposit Liability A/c $30,232

( To record the collectibility of the lease payments was notprobable )

Suppose at the end of the lease term, Sandhill receives theasset and determines that it actually has a fair value of $1,190instead of the anticipated residual value of $0. Record the entryto recognize the receipt of the asset for Sandhill at the end ofthe lease term

1/1/2020 Inventory A/c Dr. $1,190
To Gain on Lease A/c $1,1900

 
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"

Calculate your order
Pages (275 words)
Standard price: $0.00
Client Reviews
4.9
Sitejabber
4.6
Trustpilot
4.8
Our Guarantees
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Money Back
If you're confident that a writer didn't follow your order details, ask for a refund.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Power up Your Academic Success with the
Team of Professionals. We’ve Got Your Back.
Power up Your Study Success with Experts We’ve Got Your Back.