Carla Vista Corporation agrees on January 1, 2025, to lease equipment from Sandhill, Inc. for 3 years. The lease calls for annual lease payments of $22,500 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Sandhill, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $203,000. Prepare Sandhill' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date 1/1/25 12/31/25 Account Titles and Explanation (To record the recognition of the revenue each period) (To record depreciation expense on the leased equipment) Debit Credit
Carla Vista Corporation agrees on January 1, 2025, to lease equipment from Sandhill, Inc. for 3 years. The lease calls for annual lease payments of $22,500 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Sandhill, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $203,000. Prepare Sandhill' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date 1/1/25 12/31/25 Account Titles and Explanation (To record the recognition of the revenue each period) (To record depreciation expense on the leased equipment) Debit Credit
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 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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