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ACC- Fifth-Third Leasing Company and Bob Evans Farms

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Question;Assume that the;following facts pertain to a noncancelable lease agreement between Fifth-Third;Leasing Company and Bob Evans Farms, a lessee.;Inception date;January;1, 2012;Annual lease payment due at the;beginning of each year, beginning with January 1, 2012;$81,365;Residual value of equipment at end;of lease term, guaranteed by the lessee;$50,000;Lease term;6;years;Economic life of leased equipment;6;years;Fair value of asset at January 1;2012;$400,000;Lessor?s implicit rate;12%;Lessee?s incremental borrowing;rate;12%;The lessee assumes responsibility for all;executory costs, which are expected to amount to $4,000 per year. The asset;will revert to the lessor at the end of the lease term. The lessee has;guaranteed the lessor a residual value of $50,000. The lessee uses the;straight-line depreciation method for all equipment.;1. Using the spreadsheet Lease Amort;Schedule, prepare an amortization schedule that would be suitable for the;lessee for the lease term.;2. Using the spreadsheet Journal Entries;prepare the journal entries for the lessee for 2012 and 2013 to record the;lease agreement and all expenses related to the lease. Assume the lessee?s;annual accounting period ends on December 31 and that reversing entries are;used when appropriate.

 

Paper#41184 | Written in 18-Jul-2015

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