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FC.CPA
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| Posted: 23 Jul 2010 at 01:30 | IP Logged
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i don't know what i'm doing wrong or maybe my brain isn't
working, i need your help please.
when a LESSOR records a sales-type lease;
DR: Lease payment receivable 408.968.76
CR: Unearned interest revenue 108.968.76
CR: Sales revenue ; 300,000
DR: COGS 275,000
CR: Inventory 275,000
the carrying amount of the lease obligation is 300,000 on
Year 1. The annual lease payments are 51,121.08 and the
first one is received on Year 1 (on inception) so it
reduces the carrying amount (300,000 - 51,121.08) =
248,878.92.
Year 2: payment of 51,121.08 which includes interest of
24,887.89 and reduction of liability 26,233.19, and
reducing the carrying amount to 222,646.73.
my question is; when the LESSOR receives the payment of
51,121.08 in Year 2, what are the journal entries? LESSOR
has interest revenue which should reduce the unearned
interest account balance of 108,968.76 and should also
reduce the lease payment receivable account. i can't
figure out the J/Es. there are 8 payments of 51,121.08
which makes Lease payment receivable of 408,968.76.
It's on f5-24, 2009 version of Becker if you wanna look
at it but I've written down everything.
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FC.CPA
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| Posted: 23 Jul 2010 at 01:34 | IP Logged
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would it be;
DR: Cash 51, 121.08
CR: Lease payment receivable 51,121.08
but this doesn't reduce the unearned interest income
account.
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Tajik4CPA
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| Posted: 23 Jul 2010 at 02:12 | IP Logged
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DR: Cash 51, 121.08
CR: Lease payment receivable 26,233.19
CR: Earned Interest Revenue 24,887.89
Look at amortization table of lessee and the opposite is happening on the lessors side. Some portion of unearned interest revenue is earned in period 2 therefore credit interest revenue. The other portion of payment is reduction in lease receivable.
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Becker 2009 and Gleim 2010, Wiley 13.0
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FC.CPA
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| Posted: 23 Jul 2010 at 02:45 | IP Logged
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If you do entries for Year 8 (last year), you will have a
balance of 108,968.76 in Lease payment receivable. How do
you get rid of the remaining receivable? Unearned interest
income account is already down to 0 isn't it?
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Tajik4CPA
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| Posted: 23 Jul 2010 at 02:58 | IP Logged
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I see what you are saying. I guess you can think of original entry as
Lease Receivable 300
Interest Receivable 108
Since interest is not earned yet we have the contra unearned interest revenue account. I am pretty sure Becker combined entries here. Correct me If I am wrong.
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Becker 2009 and Gleim 2010, Wiley 13.0
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Topic: sales-type lease
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