2023 Complete the following exercise Submit journal entries in an Excel file and written segments | Assignments Online

Complete the following exercise. Submit journal entries in an Excel file and written segments in an MS Word document. Label each question clearly.

 

Attachmemnt contains the spreadsheets you will need for this exercise.

 

Assume that the following facts pertain to a noncancelable lease agreement between Fifth-Third Leasing Company and Bob Evans Farms, a lessee.

 

Inception dateJanuary 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.

 

Using the spreadsheet Lease Amort Schedule, prepare an amortization schedule that would be suitable for the lessee for the lease term.

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.