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Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit anuary 1, 2024 Date January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement mounts Lease Liability Interest Expense Amortization Expense 0

Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit anuary 1, 2024 Date January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement mounts Lease Liability Interest Expense Amortization Expense 0

Intermediate Accounting: Reporting And Analysis
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. Date 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit January ,2024 January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement Amounts Lease Liability Interest Expense Amortization Expense 0
Transcribed Image Text:Davidson, Incorporated leased a machine from Barwick Corporation. Barwick completed construction of the machine on January 1, 2024. The lease agreement for the $16,000,000 (fair value and present value of the lease payments) machine specified 4 equal payments at the end of each year. The useful life of the machine was expected to be 4 years with no residual value. Barwick's implicit interest rate was 9%. Lease date Fair value and present value of lease payments Lease term Useful life of machine Residual value Barwick's implicit interest rate 1. Determine the amount of each lease payment using Excel's PMT function 3. Prepare an amortization schedule for the 4-year term of the lease. Date 2. Prepare the journal entry for Davidson, Incorporated at the beginning of the lease on January 1, 2024. Date General Journal Debit January ,2024 January 1, 2024 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 Totals 4. Record the first lease payment on December 31, 2024. Date General Journal December 31, 2024 Lease Payments Effective Interest 5. Record the amortization of right-of-use asset on December 31, 2024. Date General Journal December 31, 2024 Date January 1, 2024 $16,000,000 0 0 0 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027 4 years 4 years $0 9% Decrease in Balance Debit Debit Credit Outstanding Balance 6. Indicate the amounts related to the lease reported on the year-end balance sheets and income statements. Balance Sheet Amounts Right-of-Use Asset Credit Credit Income Statement Amounts Lease Liability Interest Expense Amortization Expense 0
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