Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Macinski Leasing Company Leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3

Macinski Leasing Company Leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3 year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3 year useful life and no residual value. The lease was signed on January 1, 2017. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2017.

a) Discuss the nature of the lease agreement and the accounting method that each party to the lease should apply

b) Prepare amortization schedule suitable for both the lessor and lessee

c) Prepare the journal entry at commencement of the lease for Macinski

d) Prepare the journal entry at commencement of the lease for Sharrer

e) Prepare the journal entry at commencement of the lease for Sharrer, assuming (1) Sharrer does not know Macinski's implicit rate (Sharrer's incremental borrowing rate is 9%), and (2) Sharrer incurs initial direct costs of $10,000.

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

Commercial Energy Auditing Reference Handbook

Authors: Steve Doty

2nd Edition

1439851972, 978-1439851975

More Books

Students also viewed these Accounting questions

Question

Do left-handed people tend to be involved in more car crashes?

Answered: 1 week ago

Question

How is a futures contract priced?

Answered: 1 week ago

Question

Detailed note on the contributions of F.W.Taylor

Answered: 1 week ago

Question

6. Have you used solid reasoning in your argument?

Answered: 1 week ago