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10. A Corp. manufactures equipment. B Corp. Leasing purchased equipment from A Corp for $2,450,000 and leased it to C Incorporated Group, on January 1, 2024. Lease Description: Quarterly lease payments $159,882-beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of equipment 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset $2,450,000 Required: 1. How should this lease be classified by C Incorporated Group and B Corp Leasing? 2. Prepare appropriate entries for both C Incorporated Group and B Corp Leasing from the beginning of the lease through the second rental payment on April 1, 2024. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume C Incorporated Group leased the equipment directly from the manufacturer, A Corp. which produced the machine at a cost of $2.1 million. Prepare appropriate entries for A Corp from the beginning of the lease through the second lease payment on April 1, 2024.

10. A Corp. manufactures equipment. B Corp. Leasing purchased equipment from A Corp for $2,450,000 and leased it to C Incorporated Group, on January 1, 2024. Lease Description: Quarterly lease payments $159,882-beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of equipment 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset $2,450,000 Required: 1. How should this lease be classified by C Incorporated Group and B Corp Leasing? 2. Prepare appropriate entries for both C Incorporated Group and B Corp Leasing from the beginning of the lease through the second rental payment on April 1, 2024. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume C Incorporated Group leased the equipment directly from the manufacturer, A Corp. which produced the machine at a cost of $2.1 million. Prepare appropriate entries for A Corp from the beginning of the lease through the second lease payment on April 1, 2024.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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10. A Corp. manufactures equipment. B Corp. Leasing purchased equipment from A Corp for $2,450,000 and leased it to C Incorporated Group, on January 1, 2024. Lease Description: Quarterly lease payments $159,882-beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of equipment 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset $2,450,000 Required: 1. How should this lease be classified by C Incorporated Group and B Corp Leasing? 2. Prepare appropriate entries for both C Incorporated Group and B Corp Leasing from the beginning of the lease through the second rental payment on April 1, 2024. Adjusting entries are recorded at the end of each fiscal year (December 31). Assume C Incorporated Group leased the equipment directly from the manufacturer, A Corp. which produced the machine at a cost of $2.1 million. Prepare appropriate entries for A Corp from the beginning of the lease through the second lease payment on April 1, 2024.
Transcribed Image Text:10. A Corp. manufactures equipment. B Corp. Leasing purchased equipment from A Corp for $2,450,000 and leased it to C Incorporated Group, on January 1, 2024. Lease Description: Quarterly lease payments $159,882-beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of equipment 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset $2,450,000 Required: 1. How should this lease be classified by C Incorporated Group and B Corp Leasing? 2. Prepare appropriate entries for both C Incorporated Group and B Corp Leasing from the beginning of the lease through the second rental payment on April 1, 2024. Adjusting entries are recorded at the end of each fiscal year (December 31). Assume C Incorporated Group leased the equipment directly from the manufacturer, A Corp. which produced the machine at a cost of $2.1 million. Prepare appropriate entries for A Corp from the beginning of the lease through the second lease payment on April 1, 2024.
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