Company A (sse) has reached a lease agreement with Company (essor) to lease a noe boom lill beginning January 1, Year 1 The lease agreement contains the following information • The lease is for three years requiring annual payments at the beginning of the year of $10,213 (annuity-due basis). The boom lift has a fair value at the beginning of the lease of $40,000; an estimated economic life of five years; and en unquaranteed residual value of $12,500. • Present value of the residual value is $10,798 • There are no renewal options. At the end of the lease the boom lift will be returned to Company B • The lease does not pass any of the finance lease tests. What is the journal entry that Company A should make on January 1, Year 1 to record the lease? Debit Leased Asset for $40,000; Credit Lease Liability for $40,000 Debit Leased Asset for $29,787; Credit Lease Liability for $29,787 Debit Leased Asset for $27,500; Credit Lease Liability for $27,500 Debit Leased Asset for $29,202; Credit Lease Liability for $29,202
Company A (sse) has reached a lease agreement with Company (essor) to lease a noe boom lill beginning January 1, Year 1 The lease agreement contains the following information • The lease is for three years requiring annual payments at the beginning of the year of $10,213 (annuity-due basis). The boom lift has a fair value at the beginning of the lease of $40,000; an estimated economic life of five years; and en unquaranteed residual value of $12,500. • Present value of the residual value is $10,798 • There are no renewal options. At the end of the lease the boom lift will be returned to Company B • The lease does not pass any of the finance lease tests. What is the journal entry that Company A should make on January 1, Year 1 to record the lease? Debit Leased Asset for $40,000; Credit Lease Liability for $40,000 Debit Leased Asset for $29,787; Credit Lease Liability for $29,787 Debit Leased Asset for $27,500; Credit Lease Liability for $27,500 Debit Leased Asset for $29,202; Credit Lease Liability for $29,202
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![10
Company A (lessee) has reached a lease agreement with Company B (lessor) to lease a new boom lifl beginning January 1, Year 1 The lease agreement contains the following information
• The lease is for three years requiring annual payments at the beginning of the year of $10,213 (annuity-due basis).
• The boom lift has a fair value at the beginning of the lease of $40,000; an estimated economic life of five years; and an unguaranteed residual value of $12,500.
• Present value of the residual value is $10,798.
• There are no renewal options. At the end of the lease the boom lift will be returned to Company B.
• The lease does not pass any of the finance lease tests.
What is the journal entry that Company A should make on January 1, Year 1 to record the lease?
O Debit Leased Asset for $40,000; Credit Lease Liability for $40,000
O Debit Leased Asset for $29,787; Credit Lease Liability for $29,787
O Debit Leased Asset for $27,500; Credit Lease Liability for $27,500
Debit Leased Asset for $29,202; Credit Lease Liability for $29,202](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffa782328-2b7e-43ad-b3ca-cce7e46a7b42%2F11fc64c9-beb9-4931-8ece-cb79face7876%2Frw6jamv_processed.png&w=3840&q=75)
Transcribed Image Text:10
Company A (lessee) has reached a lease agreement with Company B (lessor) to lease a new boom lifl beginning January 1, Year 1 The lease agreement contains the following information
• The lease is for three years requiring annual payments at the beginning of the year of $10,213 (annuity-due basis).
• The boom lift has a fair value at the beginning of the lease of $40,000; an estimated economic life of five years; and an unguaranteed residual value of $12,500.
• Present value of the residual value is $10,798.
• There are no renewal options. At the end of the lease the boom lift will be returned to Company B.
• The lease does not pass any of the finance lease tests.
What is the journal entry that Company A should make on January 1, Year 1 to record the lease?
O Debit Leased Asset for $40,000; Credit Lease Liability for $40,000
O Debit Leased Asset for $29,787; Credit Lease Liability for $29,787
O Debit Leased Asset for $27,500; Credit Lease Liability for $27,500
Debit Leased Asset for $29,202; Credit Lease Liability for $29,202
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