Assume that IBM leased equipment that was carried at a cost of $92,000 to Carla Vista Company. The term of the lease is 6 years December 31, 2019, with equal rental payments of $18,427 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $92,001. The equipment has a useful life of 6 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 $92,001.Prepare IBM’s December 31, 2020, entry to record the lease transaction with Carla Vista Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount These are the accounts that can be used: Accounts Payable Accumulated Depreciation-Buildings Accumulated Depreciation-Leased Buildings Accumulated Depreciation-Capital Leases Accumulated Depreciation-Equipment Accumulated Depreciation-Leased Equipment Accumulated Depreciation-Leased Machinery Accumulated Depreciation-Machinery Accumulated Depreciation-Right-of-Use Asset Advertising Expense Amortization Expense Airplanes Buildings Cash Cost of Goods Sold Deferred Gross Profit Deposit Liability Depreciation Expense Equipment Executory Costs Executory Costs Payable Gain on Disposal of Equipment Gain on Disposal of Plant Assets Gain on Lease Gain on Sale of Buildings Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Land Leased Asset Leased Buildings Leased Equipment Lease Expense Leased Land Lease Liability Lease Receivable Lease Revenue Legal Expense Loss on Capital Lease Machinery Maintenance and Repairs Expense Notes Payable Prepaid Lease Executory Costs Prepaid Legal Fees Property Tax Expense Property Tax Payable Rent Expense Rent Payable Rent Receivable Rent Revenue Revenue from Sale-Leaseback Right-of-Use Asset Salaries and Wages Expense Sales Revenue Selling Expenses Trucks Unearned Profit on Sale-Leaseback Unearned Lease Revenue Unearned Service Revenue

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Assume that IBM leased equipment that was carried at a cost of $92,000 to Carla Vista Company. The term of the lease is 6 years December 31, 2019, with equal rental payments of $18,427 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $92,001. The equipment has a useful life of 6 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 $92,001.

Prepare IBM’s December 31, 2020, entry to record the lease transaction with Carla Vista Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)

Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount

These are the accounts that can be used:

  • Accounts Payable
  • Accumulated Depreciation-Buildings
  • Accumulated Depreciation-Leased Buildings
  • Accumulated Depreciation-Capital Leases
  • Accumulated Depreciation-Equipment
  • Accumulated Depreciation-Leased Equipment
  • Accumulated Depreciation-Leased Machinery
  • Accumulated Depreciation-Machinery
  • Accumulated Depreciation-Right-of-Use Asset
  • Advertising Expense
  • Amortization Expense
  • Airplanes
  • Buildings
  • Cash
  • Cost of Goods Sold
  • Deferred Gross Profit
  • Deposit Liability
  • Depreciation Expense
  • Equipment
  • Executory Costs
  • Executory Costs Payable
  • Gain on Disposal of Equipment
  • Gain on Disposal of Plant Assets
  • Gain on Lease
  • Gain on Sale of Buildings
  • Insurance Expense
  • Interest Expense
  • Interest Payable
  • Interest Receivable
  • Interest Revenue
  • Inventory
  • Land
  • Leased Asset
  • Leased Buildings
  • Leased Equipment
  • Lease Expense
  • Leased Land
  • Lease Liability
  • Lease Receivable
  • Lease Revenue
  • Legal Expense
  • Loss on Capital Lease
  • Machinery
  • Maintenance and Repairs Expense
  • Notes Payable
  • Prepaid Lease Executory Costs
  • Prepaid Legal Fees
  • Property Tax Expense
  • Property Tax Payable
  • Rent Expense
  • Rent Payable
  • Rent Receivable
  • Rent Revenue
  • Revenue from Sale-Leaseback
  • Right-of-Use Asset
  • Salaries and Wages Expense
  • Sales Revenue
  • Selling Expenses
  • Trucks
  • Unearned Profit on Sale-Leaseback
  • Unearned Lease Revenue
  • Unearned Service Revenue
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