Question
AEK Company purchased a computerized machine on January 1, 2019, for $2,800,000 for the purpose of leasing it. The machine was expected to have an
AEK Company purchased a computerized machine on January 1, 2019, for $2,800,000 for the purpose of leasing it. The machine was expected to have an seven-year life from January 1, 2019, to have no salvage value, and to be depreciated on a straight- line basis. On January 1,2019, AEK leases the machine to U-Life Company at a total rental of $1,500,000, payable in four annual installments in the following acceleration pattern; 15% in the first two years, 25% in the third year and 45% in the last year. The lease payment begins on the lease signing contract date. In addition to the rent, U-Life is required to pay annual executory cost of $25,000 to cover unusual repairs and insurance. The lease does not qualify as capital lease for reporting purposes.
Required: Provide all necessary entries to record the lease transactions for 2019 and 2022 on the books of
- AEK Company
- U-Life Company
- AEK Companys Book.
| Date | Account Title | Debit | Credit |
| 2019 Jan.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dec. 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2022 Jan.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- U-Life Companys Book.
| Date | Account Title | Debit | Credit |
| 2019 Jan.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2022 Jan.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started