My first Magazine AC 501 All Assignments | Page 16

The asset will revert to the lessor at the end of the lease term, at which
time the asset is expected to have a residual value of $ 7,000, none of
which is guaranteed.
Plote Company assumes direct responsibility for all executor costs,
which include the following annual amounts: (1) $ 900 to Rocky
Mountain Insurance Company for insurance, and (2) $ 1,600 to Laclede
County for property taxes.
The agreement requires equal annual rental payments of $ 18,142.95
to the lessor, beginning on January 1, 2008.
The lessee’s incremental borrowing rate is 12%. The lessor’s implicit
rate is 10% and is known to the lessee.
Plote Company uses the straight-line depreciation method for all
equipment.
Plote uses reversing entries when appropriate.
Instructions: (Round all numbers to the nearest cent.)
Prepare an amortization schedule that would be suitable for the lessee
for the lease term.
Prepare all of the journal entries for the lessee for 2008 and 2009 to
record the lease agreement, the lease payments, and all expenses
related this lease. Assume the lessee’s annual accounting period ends
on December 31.
E18-11: (Change in Estimate - Depreciation) Peter M. Dell Co.
purchased equipment for $ 510,000 which was estimated to have a