Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2025. The lease is for an 8-year period and requires equal
Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2025. Crosley had purchased the machine during 2024 for $160,000. Collectability of lease payments by Crosley is probable. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease. Crosley set the annual rental to ensure a 6% rate of return. Assume that Dexter Corporation does not know the rate implicit in the lease used by Crosley, and Dexter's incremental borrowing rate is 8%. In addition, assume that Dexter incurs initial direct costs of $15,000. Both the lessor and the lessee have a December 31 yearend. \#4 (2 of 2 ) Instructions a. Who is the lessee? The lessor? b. What is the nature of the lease to Dexter? To Crosley? c. Prepare all necessary journal entries for Crosley through January 1, 2026. d. Prepare all necessary journal entries for Dexter through January 1, 2026. Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2025. Crosley had purchased the machine during 2024 for $160,000. Collectability of lease payments by Crosley is probable. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease. Crosley set the annual rental to ensure a 6% rate of return. Assume that Dexter Corporation does not know the rate implicit in the lease used by Crosley, and Dexter's incremental borrowing rate is 8%. In addition, assume that Dexter incurs initial direct costs of $15,000. Both the lessor and the lessee have a December 31 yearend. \#4 (2 of 2 ) Instructions a. Who is the lessee? The lessor? b. What is the nature of the lease to Dexter? To Crosley? c. Prepare all necessary journal entries for Crosley through January 1, 2026. d. Prepare all necessary journal entries for Dexter through January 1, 2026
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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