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On January 1 , 2 0 2 5 , Sunland Company leased equipment to Carla Vista Corporation. The following information pertains to this lease. The
On January Sunland Company leased equipment to Carla Vista Corporation. The following information pertains to this lease.
The term of the noncancelable lease is years. At the end of the lease term, Carla Vista has the option to purchase the
equipment for $ while the expected residual value at the end of the lease is $
Equal rental payments are due on January of each year, beginning in
The fair value of the equipment on January is $ and its cost is $
The equipment has an economic life of years. Carla Vista depreciates all of its equipment on a straightline basis.
Sunland set the annual rental to ensure a rate of return. Carla Vista's incremental borrowing rate is and the implicit
rate of the lessor is unknown.
Collectibility of lease payments by the lessor is probable.
Both the lessor and the lessee's accounting periods end on December
Click here to view factor tables.
For calculation purposes, use decimal places as displayed in the factor table provided.
Prepare all the necessary journal entries for Sunland for List all debit entries before credit entries. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select No Entry" for the account titles
and enter for the amounts. Round answers to decimal places, eg Record journal entries in the order presented in the problem.
Date
Account Titles and Explanation
RightofUse Asset
Lease Liability
Lease Liability
Lease Liability
To record the lease
To record lease payment
Debit
Credit
Fair Value of Leased Asset: $
Less: Present value of bargainpurchase option $
$ x
PV of lease payments: $
Six annual lease payments: $ $
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