Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sheridan Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $36,100 each, beginning December 31, 2019.

image text in transcribed

Sheridan Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $36,100 each, beginning December 31, 2019. In addition, Sheridan guarantees the lessor a residual value of $19,800 at the end of the lease. However, Sheridan believes it is probable that the expected residual value at the end of the lease term will be $9,800. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $150,000. Prepare Lost Ark's 2019 and 2020 journal entries, assuming the implicit rate of the lease is 10% and this is known to Sheridan. (Credit account titles are automatically indented when amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Debit Credit Date December 31, 2019 Account Titles and Explanation Lease Receivable Cost of Goods Sold Sales Revenue Inventory (To record the lease) Cash December 31, 2019 Lease Receivable (To record receipt of lease payment) December 31, 2020 Cash Lease Receivable Interest Revenue

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_2

Step: 3

blur-text-image_3

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

Blockchain Technology In Accounting And Auditing

Authors: Prof Oleksandr Melnychenko

1st Edition

1976900328, 978-1976900327

More Books

Students also viewed these Accounting questions