Winston Industries and Ewing inc. enter into an agreement that requires Ewing incto build three diesel electric engines to Winston's specifcations. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non cancelable, becomes effective on January 1, 2020, and requires annual rental payments of $384,532 each January 1, starting January 1, 2020 Winston's incremental borrowing rate is 8%. The implicit interest rate used by Ewing and known to Winston is 6%. The total cost of building the three engines is Say:00,000. The economic life of the engines is estimated to be 10 years with residual value set at zero. Winston depreciates simir equipment on a straight-line basis. At the end of the lease, Winston assumes title to the engines Collectibility of the lease payments is probable. Click here to view factor tables. (a) Your answer is correct. Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor The lease should be treated as a finance lease by Winston Industries The lease should be treated as a sale-type lease by Ewing inc. e Textbook and Media List of Accounts Attempts 2 of 4 used (b), (c) and (d) b) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Winston (the lessee. (Credit account titles are automatically indented when amount is entered. Do notIndent mortalino entry is required, select "No Enoy for the accounts and enter for the amounts. Round present value factor calculations to decimal places 1.2512 and the final answer to decimal places 58,971) Account Titles and Explanation Debit Credit Prepare the journal entry to record the transactia on January 1, 2020, on the books of Ewing (the lessor Credit account tities are automatically Indented when amount is entered. Do not indent manly if no entry is required, elect"No Entry for the cu title and enter for the amounts Round rewers to decimal ca. 58,971.) Account Titles and Explanation Debit Credit (b), (c) and (d) (6) Prepare the journal entry to record the transaction on January 1, 2020, on the books of Winston (the lessee Credit account titles are automatically indented when amount is entered. Do not indent only if no entry is select "Entry for the account tlles and enter for the amounts Round present value foctor calculations to 5 decent places es 125124 and the final answer to decimal placeses 58,971) Account Titles and Explanation Debit Credit Id Prepare the journal entry to record the transaction on January 1, 2020 on the books of Ewing the lesson) Citoccount titles are automatically indented when amount is entered Do not indent may not required, slet No Entry for the account titles and enter for the amounts Round answers to Odecin pocess 58971) Account Titles and Explanation Debit Credit Id) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2020. Odit account titles are automatically indented when amount is entered Do not indent menino entry deco Engry for the account title and enter for the amounts) Debit Credit Account Titles and Explanation Lesses Canuary 1, 20201 Lenser Uanuary 1, 2020 Debit Credit e Textbook and Media Assistance Uued List of Accounts Attems of used (1)
