7Company A (lessee) has reached a lease agreement with Company B (lessor) to lease a new carpet weaving machine for five years beginning January 1, Year 1. The present value of the weaving machine is $47,945 18 The following amortization schedule was developed using the lease agreementCOMPANY ALEASE AMORTIZATION SCHEDULEANNUITY-DUE BASISAnnual LeaseCDateJanuary 1, Year 1January 1, Year 1 $10,355.57January 1, Year 2 10,355.57January 1, Year 3 10,355.57January 1, Year 4 10,355.57January 1, Year 5 10,355.57January 1, Year 6 2,500.00PaymentInterestReduction ofLease Liability$10,355.57$0.001,585.788,769.791,234.99 9,120.58870.169,485.40490.759,864.8296.15 2,403.85$54,277.83 $4,277.83$50,000.00LeaseLiabilityO Debit Inventory for $2,403; Credit Lease Receivable for $2,403Debit Lease Receivable for $2,403; Credit Inventory for $2,403O Debit Inventory for $2,500; Credit Lease Receivable for $2,500O Debit Lease Receivable for $2,500; Credit Inventory for $2,500$50,000.0039,644.4330,874.6521,754.0712,268.662,403.850.00What is the journal entry that Company B will make for this lease on January 1, Year 6?A

Company A (sse) has reached a lease agreement with Company 5 (lessor) to lease a new carpet weaving machine for five years beginning January 1, Year 1 The present value of the weaving machine is $47, 045 18 The following amortization schedule was developed using the lease agreement Date January 1, Year 1 January 1, Year 1 COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment $10,355.57 January 1, Year 2 10,355.57 January 1, Year 3 10,355.57 January 1, Year 4 10,355.57 January 1, Year 5 10,355.57 January 1, Year 6 2,500.00 $54,277.83 Interest Reduction of Lease Liability $10,355.57 $0.00 1.585.78 8.769.79 1,234.99 9,120.58 870.16 9.485.40 490.75 9.864.82 96.15 2,403.85 $4,277.83 $50.000.00 Lease Liability $50.000.00 39.644.43 30,874.65 21,754.07 12,268.66 2,403.85 0.00 What is the journal entry that Company B will make for this lease on January 1, Year 67 Debit Inventory for $2,403; Credit Lease Receivable for $2,403 O Debit Lease Receivable for $2.403; Credit Inventory for $2.403 O Debit Inventory for $2,500; Credit Lease Receivable for $2,500 Debit Lease Receivable for $2,500; Credit Inventory for $2,500

Company A (sse) has reached a lease agreement with Company 5 (lessor) to lease a new carpet weaving machine for five years beginning January 1, Year 1 The present value of the weaving machine is $47, 045 18 The following amortization schedule was developed using the lease agreement Date January 1, Year 1 January 1, Year 1 COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment $10,355.57 January 1, Year 2 10,355.57 January 1, Year 3 10,355.57 January 1, Year 4 10,355.57 January 1, Year 5 10,355.57 January 1, Year 6 2,500.00 $54,277.83 Interest Reduction of Lease Liability $10,355.57 $0.00 1.585.78 8.769.79 1,234.99 9,120.58 870.16 9.485.40 490.75 9.864.82 96.15 2,403.85 $4,277.83 $50.000.00 Lease Liability $50.000.00 39.644.43 30,874.65 21,754.07 12,268.66 2,403.85 0.00 What is the journal entry that Company B will make for this lease on January 1, Year 67 Debit Inventory for $2,403; Credit Lease Receivable for $2,403 O Debit Lease Receivable for $2.403; Credit Inventory for $2.403 O Debit Inventory for $2,500; Credit Lease Receivable for $2,500 Debit Lease Receivable for $2,500; Credit Inventory for $2,500

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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6 Company A (lessee) has reached a lease agreement with Company B (assor) to kase a new carpet weaving machine beginning January 1, Year 1. The lease agreement contains the following information • The lease is for five years, requiring annual payments of $10,355.67 at the beginning of the year. • The weaving machine has a fair value at the beginning of the lease of $50,000; an estimated economic life of five years; and a guaranteed residual value of $2,500 (Company A expects that the value will be greater). • Present value of the weaving machine is $47,945.18. • There are no renewal options. At the end of the lease, the weaving machine will be returned to Company B. • Company A depreciates similar equipment that it purchases on a straight-line basis. • Company B sels the annual lease rate al 5% and Company A is aware of the rate. • The lease is a finance lease. COMPANY A LEASE AMORTIZATION SCHEDULE ANNUITY-DUE BASIS Annual Lease Payment Date January 1, Year 1 January 1, Year 1 January…
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