july 1st 2020

25 MINUTES The X Company leased equipment to Y Company on July 1st, 2020. The terms of the lease are as follows: Lease Term 8 years Economic Life of the lease 10 years Fair market value of equipment $120,000 Guaranteed residual value $ 15,000 Lessee's incremental borrowing rate 6% Annual lease payment, due each July 1 st $ 16,000 Y uses straight-line amortization and its year-end is December 31. The first lease payment was July 1 st, 2020. Required:- Prepare the journal entries for the lease from July 1 to December 31, 2020 (12 marks) (CLEARLY SHOW ALL CALCULATIONS) PART B(8 MARKS) 15 MINUTES X Company reports under ASPE, leases machinery on January 1,2020, and records this as a capital lease. Seven annual lease payments of $140,000 are required at the end of each year, starting December 3 1st.2020. The present value of the lease payments at 10% is $681,600. Title passes to X at the end of the lease. X uses the effective interest method of amortization for the lease. The company uses straight- line depreciation over the equipment's expected useful life of eight years, with no residual value. Required:- Prepare a lease amortization table for 2020 and 2021(3 marks) Prepare the general journal entries relating to this lease for 2020