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Blossom Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2023, it signed a 15- year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $555,000 on March 30, 2023, with one third of the amount attributable to the land and two thirds to the building. The land is expected to double in value over the next 15 years, while the building will depreciate by 60%. The lease includes a purchase option at the end of the lease that allows Blossom to receive title to the property for a payment of $264,300, which is considered a BPO. Blossom is required to make rental payments of $24,000 annually, with the first payment due March 30, 2023. The MIC's implicit interest rate, known to all, is 9%. The building's economic life is estimated at 25 years, at which time it will have a small residual value of $40,000. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. C. Assuming that Blossom's year end is December 31, prepare the entries that are required on December 31, 2023, March 30, 2024, and December 31, 2024. Blossom does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record interest.) (To record depreciation expense.) (To record lease payment.) (To record interest.) (To record depreciation expense.)

Blossom Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2023, it signed a 15- year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $555,000 on March 30, 2023, with one third of the amount attributable to the land and two thirds to the building. The land is expected to double in value over the next 15 years, while the building will depreciate by 60%. The lease includes a purchase option at the end of the lease that allows Blossom to receive title to the property for a payment of $264,300, which is considered a BPO. Blossom is required to make rental payments of $24,000 annually, with the first payment due March 30, 2023. The MIC's implicit interest rate, known to all, is 9%. The building's economic life is estimated at 25 years, at which time it will have a small residual value of $40,000. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. C. Assuming that Blossom's year end is December 31, prepare the entries that are required on December 31, 2023, March 30, 2024, and December 31, 2024. Blossom does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record interest.) (To record depreciation expense.) (To record lease payment.) (To record interest.) (To record depreciation expense.)

FINANCIAL ACCOUNTING
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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Blossom Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2023, it signed a 15- year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $555,000 on March 30, 2023, with one third of the amount attributable to the land and two thirds to the building. The land is expected to double in value over the next 15 years, while the building will depreciate by 60%. The lease includes a purchase option at the end of the lease that allows Blossom to receive title to the property for a payment of $264,300, which is considered a BPO. Blossom is required to make rental payments of $24,000 annually, with the first payment due March 30, 2023. The MIC's implicit interest rate, known to all, is 9%. The building's economic life is estimated at 25 years, at which time it will have a small residual value of $40,000. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. C. Assuming that Blossom's year end is December 31, prepare the entries that are required on December 31, 2023, March 30, 2024, and December 31, 2024. Blossom does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record interest.) (To record depreciation expense.) (To record lease payment.) (To record interest.) (To record depreciation expense.)
Transcribed Image Text:Blossom Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2023, it signed a 15- year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $555,000 on March 30, 2023, with one third of the amount attributable to the land and two thirds to the building. The land is expected to double in value over the next 15 years, while the building will depreciate by 60%. The lease includes a purchase option at the end of the lease that allows Blossom to receive title to the property for a payment of $264,300, which is considered a BPO. Blossom is required to make rental payments of $24,000 annually, with the first payment due March 30, 2023. The MIC's implicit interest rate, known to all, is 9%. The building's economic life is estimated at 25 years, at which time it will have a small residual value of $40,000. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. C. Assuming that Blossom's year end is December 31, prepare the entries that are required on December 31, 2023, March 30, 2024, and December 31, 2024. Blossom does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record interest.) (To record depreciation expense.) (To record lease payment.) (To record interest.) (To record depreciation expense.)
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