prepare journal wntries for concord for the year 2020
prepare journal entries for concord for the year 2021. assume that the equipment has a fair value of $11,500 at the end of the 3-year lease form
On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments $47,500 per year. Additional intormation pertaining to the lease is as follows: 1. The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due overy January 1 . beginning January 1, 2019. 2. The fair value of the manufacturing equipment on January 1,2019 , is $150,000. The equipment has an economic life of 7 years, 3. Conoord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term. Concord considers it probable that it will have to pay $5,000 cash at the end of the lease terms to satisty this residual value guarantee. 4. Concord Corp. depreciates similar assets using the straight-line method. 5. Concord's incremental borrowing rate is 12% per year; Stone's implicit interest rate is 10% and known by Concord. 6. Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes directly to the applicable third party. Aequired: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord. 2. Prepare a table summarizing the loase payments and interest expense. 3. Prepare joumal entries for Concord for the entire lease period. Assume that the equipment has a fair value of $11,500 at the end of the 3 -year CHART OF ACCOUNTS Concord Corp. General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Cost of Goods Sold 181 Equipment 511 Insurance Expense 189 Accumulated Depreciation 512 Utilities Expense 190 Right-of-Use Asset 513 Lease Expense 514 Maintenance Expense LIABILITIES 515 Amortization Expense 211 Accounts Payable 521 Salaries Expense 181 Equipment 511 Insurance Expense 189 Accumulated Depreciation 512 Utilities Expense 190 Right-of-Use Asset 513 Lease Expense 514 Maintenance Expense LIABILITIES 515 Amortization Expense 211 Accounts Payable 521 Salaries Expense 231 Salaries Payable 532 Bad Debt Expense 253 Lease Liability 540 Interest Expense 261 Income Taxes Payable 541 Depreciation Expense 559 Miscellaneous Expenses EQUITY 891 Loss on Residual of Right-of-Use Asset 311 Common Stock 892 Gain on Residual of Right-of-Use Asset 331 Retained Earnings 910 Property Tax Expense Analysis Shaded cells have feodback. Score: 32/32 Concord Corp. Summary of Lease Payments and Interest Expense PAGE 1 GENERAL JOURNAL Score: 106/113 On January 1, 2019, Concord Corp. signs a contract to lease nonspecialized manufacturing equipment from Stone Inc. Concord agrees to make lease payments $47,500 per year. Additional intormation pertaining to the lease is as follows: 1. The term of the noncancelable lease is 3 years, with a renewal option at the end of the lease term. Payments are due overy January 1 . beginning January 1, 2019. 2. The fair value of the manufacturing equipment on January 1,2019 , is $150,000. The equipment has an economic life of 7 years, 3. Conoord guarantees that the equipment will have a residual value of $15,000 at the end of the lease term. Concord considers it probable that it will have to pay $5,000 cash at the end of the lease terms to satisty this residual value guarantee. 4. Concord Corp. depreciates similar assets using the straight-line method. 5. Concord's incremental borrowing rate is 12% per year; Stone's implicit interest rate is 10% and known by Concord. 6. Concord pays $2,500 per year for maintenance of the equipment and $1,000 in property taxes directly to the applicable third party. Aequired: 1. Next Level Examine and evaluate each capitalization criteria and determine what type of lease this is for Concord. 2. Prepare a table summarizing the loase payments and interest expense. 3. Prepare joumal entries for Concord for the entire lease period. Assume that the equipment has a fair value of $11,500 at the end of the 3 -year CHART OF ACCOUNTS Concord Corp. General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 141 Inventory EXPENSES 152 Prepaid Insurance 500 Cost of Goods Sold 181 Equipment 511 Insurance Expense 189 Accumulated Depreciation 512 Utilities Expense 190 Right-of-Use Asset 513 Lease Expense 514 Maintenance Expense LIABILITIES 515 Amortization Expense 211 Accounts Payable 521 Salaries Expense 181 Equipment 511 Insurance Expense 189 Accumulated Depreciation 512 Utilities Expense 190 Right-of-Use Asset 513 Lease Expense 514 Maintenance Expense LIABILITIES 515 Amortization Expense 211 Accounts Payable 521 Salaries Expense 231 Salaries Payable 532 Bad Debt Expense 253 Lease Liability 540 Interest Expense 261 Income Taxes Payable 541 Depreciation Expense 559 Miscellaneous Expenses EQUITY 891 Loss on Residual of Right-of-Use Asset 311 Common Stock 892 Gain on Residual of Right-of-Use Asset 331 Retained Earnings 910 Property Tax Expense Analysis Shaded cells have feodback. Score: 32/32 Concord Corp. Summary of Lease Payments and Interest Expense PAGE 1 GENERAL JOURNAL Score: 106/113
