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On January 1, 2024, Ghosh Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2027, at which time possession
On January 1, 2024, Ghosh Industries leased a high-performance conveyer to Karrier Company for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Ghosh.
- The equipment cost Ghosh $956,400 and has an expected useful life of five years.
- Ghosh expects the residual value at December 31, 2027, will be $300,400.
- Negotiations led to the lessee guaranteeing a $340,400 residual value.
- Equal payments under the finance/sales-type lease are $200,400 and are due on December 31 of each year with the first payment being made on December 31, 2024.
- Karrier is aware that Ghosh used a 4% interest rate when calculating lease payments.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
- Prepare the appropriate entries for both Karrier and Ghosh on January 1, 2024, to record the lease.
- Prepare all appropriate entries for both Karrier and Ghosh on December 31, 2024, related to the lease.
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