Question
PLEASE HELP ASAP Krause Company on January 1, 2016, enters into a 10-year noncancelable lease, for equipment having an estimated useful life of 10 years
PLEASE HELP ASAP
Krause Company on January 1, 2016, enters into a 10-year noncancelable lease, for equipment having an estimated useful life of 10 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $4,000,000. Krause's incremental borrowing rate is 8%. Krause uses the straight-line method to depreciate its assets. The lease contains the following provisions:
| 1. | Rental payments of $584,000 including $52,000 for executory costs, payable at the beginning of each year. | |
| 2. | A guarantee by Krause Company that Daly Corp. will realize $200,000 from selling the asset at the expiration of the lease. However, the actual residual value is expected to be $120,000. (a) What is the present value of the lease payments? (b) Is this a capital lease to Krause? Why? (c)Create a lease amortization table for the Krause (d) What journal entries would Krause record on January 1, 2018; December 31, 2018; and Jan. 1 2019? |
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Introductory Accounting Finance And Auditing For Lawyers
Authors: Lawrence A. Cunningham
5th Edition
0314912606, 978-0314912602
