Question
On January 1, 2016 P Company leased a machine with a usual selling price of $53,764 and cost of $45,000 to S Company. The lease
On January 1, 2016 P Company leased a machine with a usual selling price of $53,764 and cost of $45,000 to S Company. The lease provides for payments of $15,000 at the beginning of each year for five years. The payments include $3,000 per year for maintenance to be provided by P Company. There is a bargain purchase option of $6,000 at the end of the fifth year. The implicit interest rate in the lease is 10% per year. The equipment is being depreciated over 8 years by the straight-line method. The amortization schedules prepared by P Company and S Company are as follows:
Interest @ 10% Principal Reduction Payment Date 1/1/16 1/1/16 1/1/17 1/1/18 1/1/19 1/1/20 12/31/20 12,000 12,000 12,000 12,000 12,000 6,000 4,176 3,394 2,533 1,587 12,000 7,824 8,606 9,467 10,413 5,455 Balance 53,764 41,764 33,940 25,334 15,868 5,455 0 545 INSTRUCTIONS: From the foregoing information, prepare the elimination entries required for the December 31, 2019 consolidated worksheet. Interest @ 10% Principal Reduction Payment Date 1/1/16 1/1/16 1/1/17 1/1/18 1/1/19 1/1/20 12/31/20 12,000 12,000 12,000 12,000 12,000 6,000 4,176 3,394 2,533 1,587 12,000 7,824 8,606 9,467 10,413 5,455 Balance 53,764 41,764 33,940 25,334 15,868 5,455 0 545 INSTRUCTIONS: From the foregoing information, prepare the elimination entries required for the December 31, 2019 consolidated worksheetStep by Step Solution
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