CHAPTER 15 Leases 887 Date Payments Effective Interest Decrease in Balance Outstanding Balance (6% 3 Outstanding balance) 1/1/17 625,483 1/1/17 120,000 120,000 505,483 6/30/17 120,000 .06 (505,483) 5 30,329 89,671 415,812 1/1/18 120,000 .06 (415,812) 5 24,949 95,051 320,761 6/30/18 120,000 .06 (320,761) 5 19,246 100,754 220,007 1/1/19 120,000 .06 (220,007) 5 13,200 106,800 113,207 6/30/19 120,000 .06 (113,207) 5 6,793* 113,207 0 720,000 94,517 625,483 *Adjusted for rounding of other numbers in the schedule. 2. Prepare an amortization schedule that describes the pattern of interest revenue over the lease term for Satellite Technology. Calculation of the Lessor’s Net Investment: Present value of periodic rental payments excluding executory costs of $3,000 ($120,000 3 5.21236*) $625,483 Plus: Present value of the unguaranteed residual value 28,198 ($40,000 3 .70496†) Lessor’s net investment in lease $653,681 *Present value of an annuity due of $1: n 5 6, i 5 6%. †Present value of $1: n 5 6, i 5 6%. Note: The unguaranteed residual value is excluded from minimum lease payments, but is part of the lessor’s gross and net investment in the lease. Date Payments Effective Interest Decrease in Balance Outstanding Balance (6% 3 Outstanding balance) 1/1/17 653,681 1/1/17 120,000 120,000 533,681 6/30/17 120,000 .06 (533,681) 5 32,021 87,979 445,702 1/1/18 120,000 .06 (445,702) 5 26,742 93,258 352,444 6/30/18 120,000 .06 (352,444) 5 21,147 98,853 253,591 1/1/19 120,000 .06 (253,591) 5 15,215 104,785 148,806 6/30/19 120,000 .06 (148,806) 5 8,928 111,072 37,734 12/31/19 40,000 .06 (37,734) 5 2,266* 37,734 0 760,000 106,319 653,681 *Adjusted for rounding of other numbers in the schedule. 3. Prepare the appropriate entries for both United Cellular Systems and Satellite Technology on January 1 and June 30, 2017. January 1, 2017 United Cellular Systems (Lessee) Leased equipment (calculated above) .................................................. 625,483 Lease payable (calculated above) ..................................................... 625,483 Lease payable (payment less executory costs) ...................................... 120,000 Regulatory fees expense (executory costs) .......................................... 3,000 Cash (lease payment) ........................................................................ 123,000
Spiceland_Inter_Accounting8e_Ch15
To see the actual publication please follow the link above