AmiranteInc. manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers MedicalCenter for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteedresidual value at the end of the noncancelable lease term is estimated to be $15,000. The hospital will payrents of $60,000 at the beginning of each year and all maintenance, insurance, and taxes. Amirante Inc. in-curred costs of $250,000 in manufacturing the machine and $14,000 in negotiating and closing the lease.Amirante Inc. has determined that the collectibility of the lease payments is reasonably predictable, thatthere will be no additional costs incurred, and that the implicit interest rate is 10%.
Instructions
(Round all numbers to the nearest dollar.)
Prepare all of the lessor's journal entries for the first year.
P21-14(Lessee Computations and Entries, Capital Lease with Guaranteed Residual Value)
Assumethe same data as in P21-13 and that Chambers Medical Center has an incremental borrowing rateof10%.
Instructions
(Round all numbers to the nearest dollar.)
(a)Discuss the nature of this lease in relation to the lessee, and compute the amount of the initialobligation under capital leases.
(b)Prepare a 10-year lease amortization schedule.
(c)Prepare all of the lessee's journal entries for the first year