888 SECTION 3 Financial Instruments and Liabilities Satellite Technology (Lessor) Lease receivable (PV of lease payments 1 PV $40,000 residual value)a ........ 653,681 Cost of goods sold $500,000 2 ($40,000a 3 .70496) .............................. 471,802 Sales revenue (present value of minimum lease paymentsb) .................... 625,483 Inventory of equipment (lessor’s cost) .................................................... 500,000 Selling expense .......................................................................................... 4,500 Cash (initial direct costs) ......................................................................... 4,500 Cash (lease payment) ................................................................................... 123,000 Regulatory fees payable (or cash) .......................................................... 3,000 Lease receivable (payment less executory costs) ..................................... 120,000 June 30, 2017 aThis is the unguaranteed residual value. bAlso, $653,681 2 ($40,000a 3 .70496). United Cellular Systems (Lessee) Interest expense 6% 3 ($625,483 2 120,000) ............................................ 30,329 Lease payable (difference) .......................................................................... 89,671 Regulatory fees expense (annual fee) ......................................................... 3,000 Cash (lease payment) .............................................................................. 123,000 Satellite Technology (Lessor) Cash (lease payment) ................................................................................... 123,000 Regulatory fees payable (or cash) .......................................................... 3,000 Lease receivable (to balance) ................................................................. 87,979 Interest revenue 6% 3 ($653,681 2 120,000) ..................................... 32,021 4. Prepare the appropriate entries for both United Cellular Systems and Satellite Technology on December 31, 2019 (the end of the lease term), assuming the device is returned to the lessor and its actual residual value is $14,000 on that date. December 31, 2019 United Cellular Systems (Lessee) Depreciation expense ($625,483 ÷ 3 years) ................................................ 208,494 Accumulated depreciation .................................................................... 208,494 Accumulated depreciation (account balance) ............................................. 625,483 Leased equipment (account balance) ..................................................... 625,483 Satellite Technology (Lessor) Inventory of equipment (actual residual value) ............................................ 14,000 Loss on leased assets ($40,000 2 14,000) ................................................. 26,000 Lease receivable (account balance) ........................................................ 37,734 Interest revenue (6% 3 $37,734: from schedule) .................................. 2,266 Special Leasing Arrangements Sale-Leaseback Arrangements In a sale-leaseback transaction , the owner of an asset sells it and immediately leases it back from the new owner. Sound strange? Maybe, but this arrangement is common. In a sale-leaseback transaction two things happen: 1. The seller-lessee receives cash from the sale of the asset. PART D ● LO15–10
Spiceland_Inter_Accounting8e_Ch15
To see the actual publication please follow the link above