Use the information for Merrill Corporation from BE20–6. Assume that a residual value of $17,000 is expected at the end of the lease

Use the information for Merrill Corporation from BE20–6. Assume that a residual value of $17,000 is expected at the end of the lease, but that Merrill does not guarantee the residual value. Prepare Merrill’s September 13, 2011 journal entries, assuming an interest rate of 9% and that Merrill also uses private enterprise GAAP.

Leased Machinery........................ 136,910

    Lease Obligation....................           136,910

Using tables:

     PV of rentals  $28,000 X 4.88965  $136,910

Excel formula =PV(rate,nper,pmt,fv,type)

Using a financial calculator:
PV	$   ?	Yields $136,910
I	9%
N	6
PMT	$( 28,000)
FV	0
Type	1

Lease Obligation........................  28,000

Cash...............................            28,000