Indiana Jones Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6 annual payments of $40,000 each, beginning December 31, 2016. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at the end of the lease. However, Indiana Jones believes it is probable that the expected residual value at the end of the lease term will be $10,000. The equipment has a useful life of 6 years. Prepare Indiana Jones' December 31, 2016, journal entries assuming the implicit rate of the lease is 6% and this is known to Indiana Jones. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places e.g. 5,275.)

Your answer is partially correct. Try again. Indiana Jones Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6 annual payments of $40,000 each, beginning December 31, 2016. In addition, Indiana Jones guarantees the lessor a residual value of $20,000 at the end of the lease. However, Indiana Jones believes it is probable that the expected residual value at the end of the lease term will be $10,000. The equipment has a useful life of 6 years. Prepare Indiana Jones' December 31, 2016, journal entries assuming the implicit rate of the lease is 6% and this is known to Indiana Jones. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275.) Click here to view the factor table Date Account Titles and Explanation Debit Credit December 31, 2016 Right-of-Use Asset 240000 Lease Liability (To record the lease liability) Lease Liability 240000 December 31, 2016 40000 Cash 40000 (To record lease payment)