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Can you please show me how the Journal entries for the Lessee and Lessor are supposed to look. Thank you. E21-8. (Lessee Entries with Bargain-Purchase
Can you please show me how the Journal entries for the Lessee and Lessor are supposed to look. Thank you.
E21-8. (Lessee Entries with Bargain-Purchase Option) The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee May 1, 2014 Inception date: Annual lease payment due at the beginning of each year, beginning with May 1, 2014 S21,227.65 $4,000.00 Bargain-purchase option price at end of lease term Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $65,000.00 $91,000.00 Fair value of asset at May 1, 2014 Lessor's implicit rate 10% Lessee's incremental borrowing rate 10% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. The lessee assumes responsibility for all executory costs. Instructions (Round all numbers to the nearest cent.) (a) Discuss the nature of this lease to Rode Company. (b) Discuss the nature of this lease to Mooney Company. (c) Prepare a lease amortization schedule for Rode Company for the 5-year lease term. (d) Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015. Rode's annual accounting period ends on December 31. Reversing entries are used by RodeStep by Step Solution
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