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At January 1 , 2 0 2 4 , Widget World Corporation leased manufacturing equipment from Clinton Corporation under a 6 - year lease agreement.

At January 1,2024, Widget World Corporation leased manufacturing equipment from Clinton Corporation under a 6-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1,2024, the beginning of the lease, and on each December 31 thereafter through 2031. The equipment was acquired recently by Clinton at a cost of $146,163(its fair value) and was expected to have a useful life of 8 years with no salvage value at the end of its life. Because the lease term is only 6 years, the asset does have an expected residual value at the end of the lease term of $28,000. Clinton seeks a 7% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease.
\table[[Lease date,],[Annual lease payments,],[Lease term,],[Useful life of equipment,],[Residual value at end of lease term,],[Clinton's implicit interest rate,],[1. Determine the present value of the lease using Excel's PV function.,January 1,2024],[25,000,]]
Prepare the journal entry for Widget World Corporation at the beginning of the lease on January 1,2024.
\table[[Date,General Journal,Debit,Credit],[January 1,2024,Right-of-use asset,146,163,,,],[,Lease payable,,146,163,,]]
Prepare a partial amortization schedule for the first year of the lease.
\table[[Date,,Lease Payments,Effective Interest,\table[[Decrease in],[Balance]],\table[[Outstanding],[Balance]]],[January 1,2024,,,,I,$146,163
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