Blue Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6 annual payments of $42,200 each, beginning December 31, 2016. In addition, Blue guarantees the lessor a residual value of $19,500 at the end of the lease. However, Blue believes it is probable that the expected residual value at the end of the lease term will be $9,500. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $160,000. Prepare Lost Ark’s 2016 and 2017 journal entries, assuming the implicit rate of the lease is 10% and this is known to Blue
Blue Corporation enters into a 6-year lease of equipment on December 31, 2016, which requires 6 annual payments of $42,200 each, beginning December 31, 2016. In addition, Blue guarantees the lessor a residual value of $19,500 at the end of the lease. However, Blue believes it is probable that the expected residual value at the end of the lease term will be $9,500. The equipment has a useful life of 6 years. Assume that for Lost Ark Company, the lessor, collectibility of lease payments is probable and the carrying amount of the equipment is $160,000.
Prepare Lost Ark’s 2016 and 2017
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)