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

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Chapter1: Financial Statements And Business Decisions
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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 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.)

Click here to view factor tables.

Date
Account Titles and Explanation
Debit
Credit
December 31, 2019
 
 
 
 
 
 
 
 
(To record the lease liability)
   
December 31, 2019
 
 
 
 
 
 
 
 
(To record lease payment)
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