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Vaughn Company, as lessee, enters into a lease agreement on January 1 , 2 0 2 3 , for equipment. The following data are relevant
Vaughn Company, as lessee, enters into a lease agreement on January for
equipment. The following data are relevant to the lease agreement:
The term of the noncancelable lease is years, with no renewal option. Payments
of $ are due on January of each year.
The fair value of the equipment on January is $ The equipment
has an economic life of years with no salvage value.
Vaughn depreciates similar machinery it owns on the straightline basis.
The lessee pays all executory costs.
Vaughns incremental borrowing rate is but Vaughn knows that is the
lessors implicit interest rate.
Vaughn has a December yearend.
Required:
a Indicate the type of lease that Vaughn Company has entered into and why.
b Prepare an amortization table for Vaughn in Excel.
c Prepare the journal entries on Vaughns books for the first two years of the lease
Show formulas in excel format
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