Waterway Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5 annual payments of $36,000 each, beginning December 31, 2019. In addition, Waterway guarantees the lessor a residual value of $19,900 at the end of the lease. However, Waterway believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Ark's 2019 and 2020 journal entries, assuming the implicit rate of the lease is 10% and this is known to Waterway. (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 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 Leased Equipment 167472 Lease Liability 107644 Sales Revenue 150115 Equipment 120000 (To record the lease) December 31, 2019 Cash 36000 Lease Receivable 36000 (To record receipt of lease payment) December 31, 2020 Cash 36000 Waterway Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5 annual payments of $36,000 each, beginning December 31, 2019. In addition, Waterway guarantees the lessor a residual value of $19,900 at the end of the lease. However, Waterway believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 5 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $120,000. Prepare Lost Ark's 2019 and 2020 journal entries, assuming the implicit rate of the lease is 10% and this is known to Waterway. (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 0 decimal places e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 Leased Equipment 167472 Lease Liability 107644 Sales Revenue 150115 Equipment 120000 (To record the lease) December 31, 2019 Cash 36000 Lease Receivable 36000 (To record receipt of lease payment) December 31, 2020 Cash 36000
