Carla Vista Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annual payments of $25,500 each, beginning September 1, 2023. In addition, Carla Vista guarantees the lessor a residual value of $14,900 at lease end. The equipment has a useful life of seven years. Assume an interest rate of 12%. (Use tables below, a financial calculator, or Excel functions.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare a schedule contrasting the journal entries prepared using a guaranteed residual value with those using an unguaranteed residual value. Include in your schedule entries on August 31, 2024, for the year-end accrual of interest in the lease obligation and the recording of annual depreciation expense using the straight-line method and assuming no residual value. (List all debit entries before credit 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 O decimal places, e.g. 5,275.)
Carla Vista Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annual payments of $25,500 each, beginning September 1, 2023. In addition, Carla Vista guarantees the lessor a residual value of $14,900 at lease end. The equipment has a useful life of seven years. Assume an interest rate of 12%. (Use tables below, a financial calculator, or Excel functions.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Prepare a schedule contrasting the journal entries prepared using a guaranteed residual value with those using an unguaranteed residual value. Include in your schedule entries on August 31, 2024, for the year-end accrual of interest in the lease obligation and the recording of annual depreciation expense using the straight-line method and assuming no residual value. (List all debit entries before credit 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 O decimal places, e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Carla Vista Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annual
payments of $25,500 each, beginning September 1, 2023. In addition, Carla Vista guarantees the lessor a residual value of $14,900 at
lease end. The equipment has a useful life of seven years. Assume an interest rate of 12%. (Use tables below, a financial calculator, or
Excel functions.)
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
Prepare a schedule contrasting the journal entries prepared using a guaranteed residual value with those using an unguaranteed
residual value. Include in your schedule entries on August 31, 2024, for the year-end accrual of interest in the lease obligation and the
recording of annual depreciation expense using the straight-line method and assuming no residual value. (List all debit entries before
credit 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 O decimal places, e.g. 5,275.)
Account Titles and Explanation
Capitalization of lease Sept. 1, 2023:
August 31, 2024:
(To record interest expense)
(To record depreciation)
Guaranteed Residual Value
U
Debit
Credit
Del
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