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Oakridge Leasing Corporation signs an agreement on January 1, 2023, to lease equipment to Ivanhoe Limited. Oakridge and Ivanhoe follow ASPE. The following information relates
Oakridge Leasing Corporation signs an agreement on January 1, 2023, to lease equipment to Ivanhoe Limited. Oakridge and Ivanhoe follow ASPE. The following information relates to the agreement: 1. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of sixyears. 2. The asset's fair value at January 1,2023 , is $87,000. 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 $6,600, which is not guaranteed. 4. Ivanhoe assumes direct responsibility for all executory costs, which include the following annual amounts: $930 to Rocky Mountain Insurance Ltd. for insurance and $1,670 to James Township for property taxes. 5. The agreement requires equal annual rental payments of $20,252 to Oakridge, the lessor, beginning on January 1,2023 . 6. The lessee's incremental borrowing rate is 12%. The lessor's implicit rate is 11% and is known to the lessee. 7. Ivanhoe uses the straight-line depreciation method for all equipment. 8. Ivanhoe uses reversing entries when appropriate. Prepare all of Ivanhoe's journal entries for 2023 and 2024 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31 and that Ivanhoe uses reversing entries. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not if 0 (To record lease payment.) (To record payment of insurance) (To record payment of property taxes.) (To record interest) (To record depreciation expense.) Oakridge Leasing Corporation signs an agreement on January 1, 2023, to lease equipment to Ivanhoe Limited. Oakridge and Ivanhoe follow ASPE. The following information relates to the agreement: 1. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of sixyears. 2. The asset's fair value at January 1,2023 , is $87,000. 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 $6,600, which is not guaranteed. 4. Ivanhoe assumes direct responsibility for all executory costs, which include the following annual amounts: $930 to Rocky Mountain Insurance Ltd. for insurance and $1,670 to James Township for property taxes. 5. The agreement requires equal annual rental payments of $20,252 to Oakridge, the lessor, beginning on January 1,2023 . 6. The lessee's incremental borrowing rate is 12%. The lessor's implicit rate is 11% and is known to the lessee. 7. Ivanhoe uses the straight-line depreciation method for all equipment. 8. Ivanhoe uses reversing entries when appropriate. Prepare all of Ivanhoe's journal entries for 2023 and 2024 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume that the lessee's annual accounting period ends on December 31 and that Ivanhoe uses reversing entries. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not if 0 (To record lease payment.) (To record payment of insurance) (To record payment of property taxes.) (To record interest) (To record depreciation expense.)
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