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Exercise 21-12 (Part Level Submission) On January 1, 2020, Ivanhoe Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. 2

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Exercise 21-12 (Part Level Submission) On January 1, 2020, Ivanhoe Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. 2 3. 4. 5. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000 while the expected residual value at the end of the lease is $7,000. Equal rental payments are due on January 1 of each year, beginning in 2020 The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000. The equipment has an economic life of years. Flynn depreciates all of its equipment on a straight-line basis. Ivanhoe set the annual rental to ensure a 7% rate of return. Flynn's incremental borrowing rate is 8%, and the implicit rate of the lessoris unknown Collectibility of lease payments by the lessor is probable. 6. Both the lessor and the lessee's accounting periods end on December 31. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (6) (d) (e) Prepare the effect on the journal entry for Flynn at lease commencement, assuming initial direct costs of $2,000 are incurred by Flynn to negotiate the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO VIDEO Exercise 21-12 (Part Level Submission) On January 1, 2020, Ivanhoe Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. 2 3. 4. 5. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $1,000 while the expected residual value at the end of the lease is $7,000. Equal rental payments are due on January 1 of each year, beginning in 2020 The fair value of the equipment on January 1, 2020, is $150,000, and its cost is $120,000. The equipment has an economic life of years. Flynn depreciates all of its equipment on a straight-line basis. Ivanhoe set the annual rental to ensure a 7% rate of return. Flynn's incremental borrowing rate is 8%, and the implicit rate of the lessoris unknown Collectibility of lease payments by the lessor is probable. 6. Both the lessor and the lessee's accounting periods end on December 31. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (6) (d) (e) Prepare the effect on the journal entry for Flynn at lease commencement, assuming initial direct costs of $2,000 are incurred by Flynn to negotiate the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO VIDEO

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