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Current Attempt in Progress Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Concord Company. The following information relates to
Current Attempt in Progress Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Concord Company. The following information relates to this agreement. 1. 2. 3. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2020, is $72,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $12,000, none of which is guaranteed. The agreement requires equal annual rental payments of $21,250.90 to the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Concord uses the straight-line depreciation method for all equipment. 4. 5. 6. Click here to view factor tables. Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answers to 2 decimal places, eg. 5,265.25. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease liability) Teythook and Media Sheffield Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $41,000 at the beginning of each year, and Sheffield's incremental borrowing rate is 8%, which is the same as the lessor's implicit rate. Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $280,000. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the recognition of the revenue each period)
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