Question
Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $60,000 for the equipment in
Franklin Co. leased its manufactured equipment to Parker Inc. for a 4-year term. Franklin Co. reported a book value of $60,000 for the equipment in its inventory account. The lease commenced on January 1, 2020, with the first annual payment of $15,000 due immediately. The equipment has a useful life of 8 years, an estimated fair value of $90,000, and no residual or salvage value. The implicit rate of the lease is 5%, known by Parker. Which of the following is true regarding Parkers journal entries for 2020?
| a. | The lease receivable is equal to $55,849
| |
| b. | Lease expense of $2,042
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| c. | Amortization of right of use asset $12,958
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| d. | B & C |
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Financial Reporting and Analysis
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
7th edition
1259722651, 978-1259722653
