Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement. 1. The

Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Kingbird Company. The following information relates to this agreement.

1.

The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years.

2.

The fair value of the asset at January 1, 2020, is $85,000.

3.

The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed.

4.

The agreement requires equal annual rental payments of $27,911 to the lessor, beginning on January 1, 2020.

5.

The lessees incremental borrowing rate is 5%. The lessors implicit rate is 4% and is unknown to the lessee.

6.

Kingbird uses the straight-line depreciation method for all equipment.

Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.)

Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessees annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economic Influences On The Development Of Accounting In Firms

Authors: George J. Staubus

1st Edition

0367721325, 9780367721329

More Books

Students also viewed these Accounting questions

Question

=+3. What level of candor are decision makers willing to receive?

Answered: 1 week ago