Blossom Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,300 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,000, which Blossom is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $38,000. The implicit rate of the lease is not known to Blossom. Blossom's incremental borrowing rate is 8%. Prepare Blossom's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Blossom Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,300 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,000, which Blossom is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $38,000. The implicit rate of the lease is not known to Blossom. Blossom's incremental borrowing rate is 8%. Prepare Blossom's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Blossom Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments
of $5,300 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease
term for $2,000, which Blossom is reasonably certain it will exercise as it believes the fair value of the machinery will be at least
$5,000. The machinery has a useful life of 10 years and a fair value of $38,000. The implicit rate of the lease is not known to Blossom.
Blossom's incremental borrowing rate is 8%.
Prepare Blossom's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent
manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places,
e.g. 5,275. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
(To record lease liability)
Debit
Credit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F63b6e3b1-4bdc-4d54-a2df-6efc345f8fa7%2F3c03de33-458a-4485-89fe-8232ed4bfc93%2Fwzjh38_processed.png&w=3840&q=75)
Transcribed Image Text:Current Attempt in Progress
Blossom Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments
of $5,300 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease
term for $2,000, which Blossom is reasonably certain it will exercise as it believes the fair value of the machinery will be at least
$5,000. The machinery has a useful life of 10 years and a fair value of $38,000. The implicit rate of the lease is not known to Blossom.
Blossom's incremental borrowing rate is 8%.
Prepare Blossom's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent
manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places,
e.g. 5,275. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
(To record lease liability)
Debit
Credit
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