Packard Bell leases a variety of equipment to customers worldwide. On January 2, 2015, Packard Bell leased a Robot Router Machine (Equipment) to Southwestern Bell.
Characteristics of the lease is listed below:
* The lease is not cancelable
* The lease term is nine years
* Cost of Robot Router Machine (Equipment) is $425,148
* Southwestern Bell depreciates similar assets on a straight-line basis
* Rental payments are $50,000 on a semi-annual basis payable in advance (January 1 and July1)
* There is an additional $3,000 in executory costs in each semi-annual payment
* The estimated useful life of the Robot Router Machine (Equipment) is 15 years
* The is an $85,000 estimated unguaranteed salvage value
* The annual implicit interest rate is 14%
* The sales price of Robot Router Machine (Equipment) is not given. You must compute the sales price
* Packard Bell pays the Executory Costs on December 31 of each year to the appropriate authority
Requirements:
Prepare all journal entries for the calendar year 2015 for Packard Bell (Lessor) and Southwestern Bell (Lessee)
Round all calculations to the nearest dollar. You are also required to utilize the time value tables from the textbook. Do not compute the answers with a financial calculator as if your computations are not within +/- $2 of my solution then you will not receive any credit.