Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $30,044 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $127,378. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Prepare IBM’s December 31, 2019, journal entries at commencement of the lease.
Assume that IBM leased equipment that was carried at a cost of $97,000 to Crane Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $30,044 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $127,378. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 9%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable.
Prepare IBM’s December 31, 2019,
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Date
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Account Titles and Explanation
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Debit
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Credit
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|---|---|---|---|
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December 31, 2019
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enter an account title To record the lease
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enter a debit amount
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enter a credit amount
|
|
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enter an account title To record the lease
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title To record the lease
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title To record the lease
|
enter a debit amount
|
enter a credit amount
|
|
|
(To record the lease)
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||
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December 31, 2019
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enter an account title To record receipt of lease payment
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enter a debit amount
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enter a credit amount
|
|
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enter an account title To record receipt of lease payment
|
enter a debit amount
|
enter a credit amount
|
|
(To record receipt of lease payment)
|
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