Carla Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5 annual payments of $36,900 each, beginning December 31, 2019. In addition, Carla guarantees the lessor a residual value of $21,400 at the end of the lease. However, Carla believes it is probable that the expected residual value at the end of the lease term will be $10,700. The equipment has a useful life of 5 years. Prepare Carlas' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Carla. (Credit account titles are automatically indented when amount is entered. Do not indent
Carla Corporation enters into a 5-year lease of equipment on December 31, 2019, which requires 5 annual payments of $36,900 each, beginning December 31, 2019. In addition, Carla guarantees the lessor a residual value of $21,400 at the end of the lease. However, Carla believes it is probable that the expected residual value at the end of the lease term will be $10,700. The equipment has a useful life of 5 years.
Prepare Carlas' 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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December 31, 2019
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(To record the lease liability)
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December 31, 2019
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(To record lease payment)
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