1. On December 31, 2019, Skysong Corporation signed a5-year, non-cancelable lease for a machine. The terms of the lease called for Skysong to make annual payments of $8,162at the beginning of each year of the lease, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,100unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Skysong uses the straight-line method of depreciation for all of its plant assets. Skysong's incremental borrowing rate is9%, and the lessor's implicit rate is unknown. Click here to view factor tables.

(a)

What type of lease is this?

This is a/an select a type of lease financeoperating lease.

eTextbook and Media

List of Accounts

Assistance Used

• Accounts Payable
• Accumulated Depreciation-Buildings
• Accumulated Depreciation-Leased Buildings
• Accumulated Depreciation-Capital Leases
• Accumulated Depreciation-Equipment
• Accumulated Depreciation-Leased Equipment
• Accumulated Depreciation-Leased Machinery
• Accumulated Depreciation-Machinery
• Accumulated Depreciation-Right-of-Use Asset
• Advertising Expense
• Amortization Expense
• Airplanes
• Buildings
• Cash
• Cost of Goods Sold
• Deferred Gross Profit
• Deposit Liability
• Depreciation Expense
• Equipment
• Executory Costs
• Executory Costs Payable
• Gain on Disposal of Equipment
• Gain on Disposal of Plant Assets
• Gain on Lease
• Gain on Sale of Buildings
• Insurance Expense
• Interest Expense
• Interest Payable
• Interest Receivable
• Interest Revenue
• Inventory
• Land
• Leased Asset
• Leased Buildings
• Leased Equipment
• Lease Expense
• Leased Land
• Lease Liability
• Lease Receivable
• Lease Revenue
• Legal Expense
• Loss on Capital Lease
• Machinery
• Maintenance and Repairs Expense
• Notes Payable
• Prepaid Lease Executory Costs
• Prepaid Legal Fees
• Property Tax Expense
• Property Tax Payable
• Rent Expense
• Rent Payable
• Rent Receivable
• Rent Revenue
• Revenue from Sale-Leaseback
• Right-of-Use Asset
• Salaries and Wages Expense
• Sales Revenue
• Selling Expenses
• Trucks
• Unearned Profit on Sale-Leaseback
• Unearned Lease Revenue
• Unearned Service Revenue

Save for Later

Attempts: 0 of 5 used

Submit Answer

(b)

Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)

Present value of the lease payments

$enter the Present value of the lease payments in dollars

eTextbook and Media

List of Accounts

Save for Later

Attempts: 0 of 5 used

Submit Answer

(c)

Prepare all necessary journal entries for Skysong for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
choose a transaction date 12/31/1912/31/20	enter an account title to record the lease	enter a debit amount	enter a credit amount
	enter an account title to record the lease	enter a debit amount	enter a credit amount
	(To record the lease)
choose a transaction date 12/31/1912/31/20	enter an account title to record first lease payment	enter a debit amount	enter a credit amount
	enter an account title to record first lease payment	enter a debit amount	enter a credit amount
	(To record first lease payment)
choose a transaction date 12/31/1912/31/20	enter an account title to record amortization of the right-of-use asset	enter a debit amount	enter a credit amount
	enter an account title to record amortization of the right-of-use asset	enter a debit amount	enter a credit amount
	(To record amortization of the right-of-use asset)
choose a transaction date 12/31/1912/31/20	enter an account title to record interest expense	enter a debit amount	enter a credit amount
	enter an account title to record interest expense	enter a debit amount	enter a credit amount
	enter an account title to record interest expense	enter a debit amount	enter a credit amount
	(To record interest expense)

eTextbook and Media