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P21-13 Amirante Inc manufacturers an X-ray machine...

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Question

P21-13 Amirante Inc manufacturers an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is $411,324, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be $15,000. The hospital will pay rents of $60,000 at the beginning of each year and all maintenance, insurance, and taxes. Amirante Inc incurred 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, that there will be no additional costs incurred, and that the implicit interest rate is 10%. Instructions: (Round all numbers to nearest dollar). (a) discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items: (1) Lease receivable at the inception of the lease (2) sales price (3) cost of sales (b) prepare a 10 year lease amortization schedule (c) prepare all of the lessor's journal entries for the first year P21-14 Assume the same data as in P21-13 and that Chambers Medical Center has an incremental borrowing rate of 10%. 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 initial obligation under capital leases. (b) prepare a 10 year lease amortization schedule (c) prepare all of the lessee's journal entries for the first year

 

Paper#11164 | Written in 18-Jul-2015

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