Merrill
Corporation, which uses private enterprise GAAP, enters into a six-year lease
of machinery on September 13, 2011, that requires six annual payments of
$28,000 each, beginning September 13, 2011. In addition, Merrill guarantees the
lessor a residual value of $17,000 at lease end. The machinery has a useful
life of six years. Prepare Merrill’s September 13, 2011 journal entries,
assuming an interest rate of 9%.
Leased Machinery........................ 147,047
Lease
Obligation.................... 147,047
Using tables:
PV of rentals $28,000
X 4.88965 $136,910
[PV of guar. RV $17,000
X .59627 10,137
$147,047
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Excel formula =PV(rate,nper,pmt,fv,type)
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Using a financial calculator:
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PV
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$
?
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Yields $147,047
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I
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9%
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N
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6
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PMT
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$ 28,000
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FV
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$ 17,000
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Type
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1
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Lease Obligation........................ 28,000
Cash................................ 28,000
