Question
On January 2, Cody, Inc., sold equipment to Griff Co. for cash of $864,000 and immediately leased it back under a capital lease for 9
On January 2, Cody, Inc., sold equipment to Griff Co. for cash of $864,000 and immediately leased it back under a capital lease for 9 years. The carrying amount of the equipment was $540,000, and its estimated remaining economic life is 10 years. Annual year-end payments of $153,000, which include executory costs of $3,000, are based on an implicit interest rate of 10%, which is known to Cody. Cody's incremental borrowing rate is 13%. Cody uses the straight-line method of depreciation. The rounded present value factors of an ordinary annuity for 9 years are 5.76 at 10% and 5.2 at 13%.
Select from the pop-up boxes the account for each journal entry below. Double-click on each blank box to see a list of answer choices and click on your selection. Each choice may be used once, more than once, or not at all. Then, enter the appropriate amounts in the shaded cells. Enter all amounts as positive values. If no entry is necessary, select "No entry necessary" in the Account column and leave the Debit and Credit cells blank.
Account | Debit Amount | Credit Amount |
Indicate the journal entry to record the January 1 sale of the equipment in the sale-leaseback agreement. | ||
Indicate the journal entry to record the capital lease on January 1: | ||
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