Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Short Problem. Hughey Co. as lessee records a five-year lease of machinery with guaranteed residual value on January 1, 2011. The annual lease payments of

Short Problem. Hughey Co. as lessee records a five-year lease of machinery with guaranteed residual value on January 1, 2011. The annual lease payments of $400,000 are made at the end of each year. The present value factor for an ordinary annuity at 10% and 5 years is 3.79079. The guaranteed residual value at the end of the lease term is $120,000 and Hughey Co. expect the leased machinery to have an actual residual value of 100,000. The present value factor for a single sum at 10% and 5 years is 0.62092. The machine reverts to the lessor at the end of the lease term. Hughey uses the effective-interest method and straight-line amortization. Hughey classifies the lease as a finance lease. Please round your calculations to the nearest dollar.

(a) Prepare a lease amortization schedule.

(b) Prepare all of the lessee's journal entries for 2011.

(c) Prepare all of the lessee's journal entries for 2015, assuming that the machine is worth $60,000 at the end of the lease term when it is returned to the lessor.

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

Retirement Income Recipes In R From Ruin Probabilities To Intelligent Drawdowns

Authors: Moshe Arye Milevsky

1st Edition

3030514331, 9783030514334

More Books

Students also viewed these Accounting questions