LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Blossom, Inc. for 3 years. The lease calls forannual lease payments of $22,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargainpurchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of thelease payments is less than 90% of the fair value of the equipment.Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume theimplicit rate used by the lessor is unknown, and LEY's incremental borrowing rate is 6%. (Credit account titles are automatically indentedwhen the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round finalanswers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)Click here Date1/1/251/1/2512/31/25Account Titles and ExplanationRight-of-Use AssetLease Liability(To record lease liability)Lease LiabilityCash(To record lease payment)Lease ExpenseIntretishilingDebitEECredit

Operating lease is when the owner (lessor) allows the user (lessee) to use the asset without…

22,000 at the beginning of each year. The lease does not is not a specialized asset. In addition, the useful life of the equipm than 90% of the fair value of the equipment. entries on January 1, 2025 (commencement of the operating lea he lessor is unknown, and LE's incremental borrowing rate is 6% tered. Do not indent manually. If no entry is required, select "No Entry "ore credit entries for calculation purposes, use 5 decimal places as di

22,000 at the beginning of each year. The lease does not is not a specialized asset. In addition, the useful life of the equipm than 90% of the fair value of the equipment. entries on January 1, 2025 (commencement of the operating lea he lessor is unknown, and LE's incremental borrowing rate is 6% tered. Do not indent manually. If no entry is required, select "No Entry "ore credit entries for calculation purposes, use 5 decimal places as di

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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O On January 1, 2024, Majestic Mantles leased a lathe from Equipment Leasing under a finance lease. Lease payments are made annually. Title does not transfer to the lessee and there is no purchase option or guarantee of a residual value by Majestic. Portions of the Equipment Leasing’s lease amortization schedule appear below: January 1 Payments Effective Interest Decrease in Balance Outstanding Balance $ 314,048 2024 $ 24,000 $ 24,000 $ 290,048 2025 $ 24,000 $ 14,502 $ 9,498 $ 280,550 2026 $ 24,000 $ 14,028 $ 9,972 $ 270,578 2027 $ 24,000 $ 13,529 $ 10,471 $ 260,107 2028 $ 24,000 $ 13,005 $ 10,995 $ 249,112 2029 $ 24,000 $ 12,456 $ 11,544 $ 237,568 2030 $ 24,000 $ 11,878 $ 12,122 $ 225,446 — — — — — — — — — — — — — — — 2041 $ 24,000 $ 11,272 $ 12,728 $ 44,627 2042 $ 24,000 $ 2,231 $ 21,769 $ 22,858 2043 $ 24,000 $ 1,143 $ 22,857 $ 0 Required: What is Majestic’s lease liability at the beginning of the lease (after the first payment)? What…
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