Journal Entries

Monty Leasing Company agrees to lease equipment to Flounder Corporation on January 1, 2025. The following information relate the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $473,000, and the fair value of the asset on January 1,2025, is $746,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000, Flounder estimates that the expected residual value at the end of the lease term will be $50,000. Flounder amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2025. 5. The collectibility of the lease payments is probable. 6. Monty desires a 10% rate of return on its investments. Flounder's incremental borrowing rate is 11%, and the lessor's implici rate is unknown. (Assume the accounting period ends on December 31.) Click here to view factor tables. Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the finol answer to 0 decimal places es. 58,972.) Annual rental payment eTextbook and Media List of Accounts Attempts: 1 of 5 used (c) Your answer is correct. Compute the value of the lease liability to the lessee. (Round present volue foctor calculations to 5 decimal pioces, eg. 1.25124 and the final answer to 0 decimal places eg. 58.972.) Present value of minimum lease payments $ Prepare the journal entries Flounder would make in 2025 and 2026 related to the fease arrangement. (Credit occount titles are outomaticaliy indented when omount is entered. Do not indent manisilix. If no entry is regulred, select "No Entry" for the accourt tities and enter 0 for the omounts Round answers to 0 decimal ploces es, 58,972. Record joumal entries in the onder presented in the problen. List all debit entries before credit entries)