short accounting questions

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1-3 Minimum 60 words on your own words Why does the cost of goods sold equal the selling price for a direct finance lease? What are the disadvantages of operating and finance leases? Which is better, an operating lease, or a capital lease? 4. Complete (d) -- Exercise 21-8 (Part Level Submission) Exercise 21-8 (Part Level Submission) The following facts pertain to a noncancelable lease agreement between Cullumber Leasing Company and Riverbed Company, a lessee. Inception date: May 1, 2017 Annual lease payment due at the beginning of each year, beginning with May 1, 2017 Bargain-purchase option price at end of lease term $22,965.87 $3,600 Lease term 5 years Economic life of leased equipment 10 years Lessor’s cost $69,000 Fair value of asset at May 1, 2017 $98,000 Lessor’s implicit rate 10 % Lessee’s incremental borrowing rate 10 % The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. The expected residual value of the equipment at the end of 5 (10) years is $12,000 ($0). (c) Your answer is correct. Prepare a lease amortization schedule for Riverbed Company for the 5-year lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25126 and Round answers to 2 decimal places, e.g. 15.25.) Date 5/1/17 RIVERBED COMPANY (Lessee) Lease Amortization Schedule Annual Lease Payment Reduction of Plus Interest on Lease BPO Liability Liability $ $ $ Lease Liability $ 5/1/17 5/1/18 5/1/19 5/1/20 5/1/21 4/30/22 $ $ $ (d) Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2017 and 2018. Riverbed’s annual accounting period ends on December 31. Reversing entries are used by Riverbed. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and Round answers to 2 decimal places, e.g. 15.25.) Date Account Titles and Explanation (To record the lease.) (To record the first lease payment.) (To To record interest.) Debit Credit (To record depreciation.) 5/1/18 (To record interest.) (To record depreciation.)
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