Anthony Incorporated leases a piece of machinery to Irving Company on January 1, 2020, under the following terms.

1. The lease is to be for 4 years with rental payments of $12,471 to be made at the beginning of each year.

2. The machinery has a fair value of $67,000, a book value of $50,000, and an economic life of 10 years.

3. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000. To protect against a large loss, Anthony requests Irving to guarantee $17,500 of the residual value, which Irving agrees to do.

4. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature.

5. The implicit rate is 5%, which is known by Irving.

6. Collectibility of the payments is probable.

Prepare the journal entries for Anthony for the year 2020. (Credit account titles are automatically indented when the 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 the final answer to 0 decimal places e.g. 5,275.)

Anthony Incorporated leases a piece of machinery to Irving Company on January 1, 2020, under the following terms. 1. 2. 3. The lease is to be for 4 years with rental payments of $12,471 to be made at the beginning of each year. The machinery' has a fair value of $67,000, a book value of $50,000, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000. To protect against a large loss, Anthony requests Irving to guarantee $17,500 of the residual value, which Irving agrees to do. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. The implicit rate is 5%, which is known by Irving. Collectibility of the payments is probable. 4. 5. 6. Click here to view factor tables. Prepare the journal entries for Anthony for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Lease Receivable 67,000 Cost of Goods Sold 35,603 Inventory 50,000 Sales Revenue 52,603 (To record lease) Jan. 1 Cash 12,471 Lease Receivable 12,471 (To record first lease payment) Dec. 31 Lease Receivable 2,726 Lease Revenue 2,726 (To record lease revenue)

Question

Anthony Incorporated leases a piece of machinery to Irving Company on January 1, 2020, under the following terms.

1. The lease is to be for 4 years with rental payments of $12,471 to be made at the beginning of each year.

2. The machinery has a fair value of $67,000, a book value of $50,000, and an economic life of 10 years.

3. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000. To protect against a large loss, Anthony requests Irving to guarantee $17,500 of the residual value, which Irving agrees to do.

4. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature.

5. The implicit rate is 5%, which is known by Irving.

6. Collectibility of the payments is probable.

Prepare the journal entries for Anthony for the year 2020. (Credit account titles are automatically indented when the 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 the final answer to 0 decimal places e.g. 5,275.)

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Anthony Incorporated leases a piece of machinery to Irving Company on January 1, 2020, under the following terms. 1. 2. 3. The lease is to be for 4 years with rental payments of $12,471 to be made at the beginning of each year. The machinery' has a fair value of $67,000, a book value of $50,000, and an economic life of 10 years. At the end of the lease term, both parties expect the machinery to have a residual value of $25,000. To protect against a large loss, Anthony requests Irving to guarantee $17,500 of the residual value, which Irving agrees to do. The lease does not transfer ownership at the end of the lease term, does not have any bargain purchase options, and the asset is not of a specialized nature. The implicit rate is 5%, which is known by Irving. Collectibility of the payments is probable. 4. 5. 6. Click here to view factor tables. Prepare the journal entries for Anthony for the year 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Lease Receivable 67,000 Cost of Goods Sold 35,603 Inventory 50,000 Sales Revenue 52,603 (To record lease) Jan. 1 Cash 12,471 Lease Receivable 12,471 (To record first lease payment) Dec. 31 Lease Receivable 2,726 Lease Revenue 2,726 (To record lease revenue)