On January 1. 2022, XYZ Lessee leased equipment from Standey Inc. Lessor, signing an Operating Lease with the folowing terms- Both the cost and the fair value of the asset for Stanley Inc. Lessor is $360,000• Lease specifies 4 annual payments of S60,273 beginning January 1. 2022. and on each January 1 thereater trough 202s. The 4year tarm ends on December 31. 2026- The asset's expected residual value at the end of the lease term (4 years) is $175,000, unguaranteed by the LesseeThe expected useful life of the equipment is 7 years, and there is no expected residual value at the end of its useful ifeThere is no purchase option, and the equipment reverts back to the Lessor at the end of the 4-year periodThe implicit rate on the lease is 6%, and XYZ Lessee is aware of that rate.Assume Straight Line Depreciation is used on the Right of Use Asset.Present Value factors are the folowingPV of $17920966506PV of Annuity Due3.673015.91732n=7 6%Ar December 31. 2022. end of the first year, XYZ Lesae's Journal entry would include aOa Debit to Interest Expense for $9,667Ob Debit to Lease Liability for $9,667Oc Credit to Right-Of-Use Asset for $50,606Od. Credit to Lease Liability for $13,283Oe Credit to Right-Of-Use Asset for 60,273

The lease is a written agreement between two parties in which one part rents its asset to another…

At December 31. 2022. end of the first year, XYZ Lessee's Journal entry would Linclude a Oa Debit to Interest Expense for $9,667 Ob. Debit to Lease Liability for $9,687 Oc Credit to Right-OF-Use Asset for $50,606 Od Credit to Lease Liability for $13,283 De Credit to Right-Of-Use Asset for 60,273

At December 31. 2022. end of the first year, XYZ Lessee's Journal entry would Linclude a Oa Debit to Interest Expense for $9,667 Ob. Debit to Lease Liability for $9,687 Oc Credit to Right-OF-Use Asset for $50,606 Od Credit to Lease Liability for $13,283 De Credit to Right-Of-Use Asset for 60,273

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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