Assume that IBM leased equipment that was carried at a cost of $173,000 to Oriole Company. The term of the lease is 7 years December 31, 2019, with equal rental payments of $30,767 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $172,999. The equipment has a useful life of 7 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $172,999. Prepare IBM’s December 31, 2020, entry to record the lease transaction with Oriole Company.
Assume that IBM leased equipment that was carried at a cost of $173,000 to Oriole Company. The term of the lease is 7 years December 31, 2019, with equal rental payments of $30,767 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $172,999. The equipment has a useful life of 7 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Assume the sales-type lease was recorded at a present value of $172,999.
Prepare IBM’s December 31, 2020, entry to record the lease transaction with Oriole Company.
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