Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Recording Finance Lease Journal Entries Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement of a floor of a building on December 31,

Recording Finance Lease Journal Entries Guaranteed Residual Value

Smith, the lessee, signs an 8-year lease agreement of a floor of a building on December 31, 2020, that requires annual payments of $70,000, beginning immediately. The residual value is guaranteed to the lessor of $50,000 at the end of the lease term. Smith estimates that the residual will have a value of $30,000 at the end of the lease term. Smith is aware of the lessors implicit rate of interest of 7%. Record Smiths journal entries on December 31, 2020, assuming that the lease is properly classified as a finance lease.

  • Note: Round your answers to the nearest whole dollar.

Date Account Name Dr. Cr.
Dec. 31, 2020 AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense Answer Answer
AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense Answer Answer
To record asset and liability
Dec. 31, 2020 AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense Answer Answer
AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense Answer Answer
To record cash lease payment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting

Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Susan Wolcott

2nd Edition

1742166148, 978-1742166148

More Books

Students also viewed these Accounting questions

Question

What training is required for the position?

Answered: 1 week ago