Flint Industries and Buffalo Inc. enter into an agreement that requires Buffalo Inc. to build three diesel-electric engines to Flint's specifications. Upon completion of the engines, Flint has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2025, and requires annual rental payments of $399,657 each January 1, starting January 1, 2025. Flint's incremental borrowing rate is 8%. The implicit interest rate used by Buffalo and known to Flint is 6%. The total cost of building the three engines is $2,743,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Flint depreciates similar equipment on a straight-line basis. At the end of the lease, Flint assumes title to the engines. Collectibility of the lease payments is probable. (a) Your answer is correct. Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor. The lease should be treated as a | by Flint Industries. The lease should be treated as a by Buffalo Inc. eTextbook and Media List of Accounts Attempts: 2 of 3 used (b), (c) and (d) Prepare the journal entry to record the transaction on January 1, 2025, on the books of Flint (the lessee). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. List debit entry before credit entry.) Prepare the journal entry to record the transaction on January 1, 2025, on the books of Buffalo (the lessor). (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places e.g. 58,971. List all debit entries before credit entries.) Question 1 of 1 eTextbook and Media Solution Assistance Used List of Accounts (e1) Prepare a lease amortization schedule for 2 years. (Round answers to 0 decimal places e.g. 58,971.) FLINT INDUSTRIES/BUFFALO INCORPORATED Lease Amortization Schedule eTextbook and Media List of Accounts Save for Later Attempts: 0 of 3 used Submit Answer (e2) The parts of this question must be completed in order. This part will be available when you complete the part above. (f) The parts of this question must be completed in order. This part will be available when you complete the part above. (g) The parts of this question must be completed in order. This part will be available when you complete the part above
