The final step in the problem-solving process is to take action and implement your chosen solution.

(Lessee-Lessor Entries, Sales-Type Lease; Guaranteed Residual Value) Phelps Company leases a building to Walsh, Inc. on January

Artist 52 [7]

<u>Solution and Explanation:</u>

Calculation of Minimum lease annual payments from (MLP)

Year MLP from lessor Present value Present valur of

point of view factor 8% cash flows

1 $4,703 $1 /(1.08)=0925$ $4,350.28

2 $4,703 $1 /(1.08)^{\wedge} 2=0.857$ $4,030.47

3 $4,703 $1 /(1.08)^{\wedge} 3=0.793$ $3,729.48

4 $4,703 $1 /(1.08)^{\wedge} 4=0.735$ $3,456.71

5 $4,703 $1 /(1.08)^{\wedge} 5=0.680$ $3,198.04

Total of Minimum

lease Payments $23,515 $ 18,764.97

Add

Unguaranteed

residual value(ugrv) 4000 $1 /(1.08)^{\wedge 5}=0.680$ $2,720.00

Asset to be recorded

in the books of lessor

(sum of mlp +ugrv) $27,515 $ 21,484.97

Here

Gross Investment=$27515

Lease receivable recorded in in the books of lessor(Phelps)(Mimum lease payments + Unguaranteed residual )value = $21484 $21,484

Walsh (lessee) shoiuld be recorded the amount of present value of minimum lease payments + Guaranteed Residual value=$18764.97 as asset and liabilty

b) In the books of phelps (lessor)

2017.01.01 Lease Recievble from walsh ….Dr $21,484

to Asset $21,484

(Being Lease receivable recorded )

In the books of Walsh (lessee)

2017.01.01 Asset ac ……………Dr $18,764

to Lease Liabilty(Lessor) $18,764

(Being the asset and liabilty recorded )

2017.12.31 Depreciation ……Dr 3752

to Asset 3752

(Beint Depreciation recorded charged during the year recorded 18764/5 provided for 5 years)

Here annual payment started from the at the beginning of year i.e annual lease payments start from 01.01.2018.

c) If expected residual value of $4000 is guaranteed by walsh no changes will be made in classification of lease and there is no chages in asset recorded in Lessor books. But changes will be made in the books of lessee as present value of guaranteed residual value should be added to asset I.e $18764+Present vlue of $4000 $18764+2720=21484

d) If expected residual value of $3000 is guaranteed by walsh no changes will be made in classification of lease and there is no chages in asset recorded in Lessor books But changes will be made in the books of lessee as present value of guaranteed residual value should be added to asset I.e $18764+Present vlue of $3000 $18764+$2040=$20804

5 0

3 years ago

A new faculty member at the local university pays $1,500 per month to rent an apartment in the downtown area. She teaches on cam

Naddik [55]

Answer:

$2,700

Explanation:

Calculation for what should this professor be willing to pay in rent per month

First step is to calculate the Transportation cost per week

Transportation cost = ($25*4 hrs)* 3 per week

Transportation cost =$100*3 per week

Transportation cost= 300 a week

Now let calculate the rent per month

Rent per month= $1500 + ($300*4)

Rent per month=$1,500+$1,200

Rent per month= $2,700

Therefore what should this professor be willing to pay in rent per month to live near campus if her hourly wage rate is $25 will be $2,700

3 0

3 years ago

J&J Foods wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a share. The company has determ

Studentka2010 [4]

Answer:

$65.85

Explanation:

Calculation for What should the offer price be

Using this formula

Offer price=(Preferred stock× Liquidating value)/Return

Let plug in the formula

Offer price = (0.054 × $100) / 0.082

Offer price=5.4/0.082

Offer price = $65.85

Therefore the offer price should be $65.85

3 0

3 years ago

"the telling style of leadership has a ________ feature."

Shkiper50 [21]

Hi Laight6069,

The telling style of leadership has a <span>high-task, low-relationship feature.</span>

5 0

3 years ago

High-performance teams are characterized by: members with only individual accountability. members with specialty skills rather t

Soloha48 [4]

Answer:

extensive communication mechanisms.

Explanation:

High-performance teams is a term often used in organizational settings to describes teams that often performed better than other teams and beyond expectation. They are associated with various characteristics amongst others which are:

1. Presence of extensive communication mechanisms

2. Constant collaboration among team members

3. Define objectives and goals

4. Ability to tackle and resolve conflict amicably with speed.

7 0

3 years ago