Can you please help me figure out what I did wrong here. I got an 82% but it doe
ID: 2572277 • Letter: C
Question
Can you please help me figure out what I did wrong here. I got an 82% but it does not show me my errors. I think I am supposed to put a value in the box that I circled in red. But I am uncertain what is required !!
Federated Fabrications leased a tooling machine on January 1, 2016, for a three-year period ending December 31, 2018. The lease agreement specified annual payments of $36,000 beginning with the first payment at the inception of the lease, and each December 31 through 2017. The company had the option to purchase the machine on December 30, 2018, for $45,000 when its fair value was expected to be $60,000. The machine's estimated useful life was six years with no salvage value. Federated depreciates assets by the straight-line method. The company was aware that the lessor's implic it rate of return was 12%, which was less than Federated's incremental borrowing rate. (FV of $1. PV of $1. EVA of $1, PVA of $1. FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the amount Federated should record as a leased asset and lease liability for this capital lease t value of minimum lease payments 128,872: 2. Prepare an amortization schedule that describes the pattern of interest expense for Federated over the lease term ease Amortization Schedule Effective Interest Decrease in Balance Outstanding Balance Date Payments 01/01/2016 $ 12/31/2016 12/31/2017 12/31/2018 36,000 $ 36,000 36,000 45,000 11.145 $ 8,162 4,821 24,855 27,838 40,179 92.872 68,017 40,179 Totals $ 153,000Explanation / Answer
All the work --Pv of lease payments, depreciation, journal entries ( but for Dec 31, 2017 JE-should be Lease Payable (27838)---must be Selection of a/c error)--- are perfectly ok.
Please note the slight difference in the presentation of amortisation table-- the whole PV is amortised--the last instalment being the BPO amt.
Date Payments Effective interest Decrease in Balance O/s Balance 128872 1/1/2016 36000 0 36000 92872 12/31/2016 36000 11145 24855 68017 12/31/2017 36000 8162 27838 40179 12/31/2018 45000 4821 40179 0 153000 24128 128872