Question
The following facts pertain to a lease agreement between Leasing Company and Brown Company, a lessee. (Round all numbers to the nearest cent.) Inception date:
The following facts pertain to a lease agreement between Leasing Company and Brown Company, a lessee. (Round all numbers to the nearest cent.)
Inception date: March 1, 2019
Annual lease payment due at the beginning of each year, beginning with March 1, 2019: 13,604.79.
Unguaranteed residual value after 6 years is 5,000.00
. Lease term: 6 years
Economic life of leased equipment: 10 years
Lessors cost: 53,000.00; fair value of asset at March 1, 2019, 68,000.00
Lessors implicit rate: 10%; lessees incremental borrowing rate 10%
Instructions 1. Discuss the nature of this lease to Leasing Company. 2. Prepare a lease amortization schedule for Brown Company for the 6-year lease term. 3. Prepare the journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020. Browns annual accounting period ends on December 31.
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