Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: Lease term Annual payments Life of asset Fair value of asset 5 years $88,000 on January 1 each year 5 years $366,951 Implicit interest rate 10% Incremental rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
Eastern Edison Company leased equipment from Low-Tech Leasing on January 1, 2018. Low-Tech recently purchased the equipment at a cost of $366,951. Other information: Lease term Annual payments Life of asset Fair value of asset 5 years $88,000 on January 1 each year 5 years $366,951 Implicit interest rate 10% Incremental rate 10% There is no expected residual value. Required: Prepare appropriate journal entries for Low-Tech Leasing for 2018. Assume a December 31 year-end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:### Lease Information Overview:
**Eastern Edison Company** leased equipment from **Low-Tech Leasing** on January 1, 2018. The equipment was purchased at a cost of **$366,951**.
#### Details:
- **Lease term:** 5 years
- **Annual payments:** $88,000 on January 1 each year
- **Life of asset:** 5 years
- **Fair value of asset:** $366,951
- **Implicit interest rate:** 10%
- **Incremental rate:** 10%
There is no expected residual value.
### Journal Entry Instructions:
Prepare the journal entries for Low-Tech Leasing for the year 2018, assuming a December 31 year-end. If no entry is needed for a specific transaction/event, select "No journal entry required" in the first account field. Ensure to round answers to the nearest whole dollar.
### Journal Entry Worksheet:
Use this worksheet to record the entry at the inception of the lease.
- **Date:** January 01, 2018
- **Journal Columns:** General Journal, Debit, Credit
> **Note:** Enter debits before credits.
For further assistance or to view the transaction list, click the "View transaction list" button.
Expert Solution
Step 1
Appropriate journal entry for low tech leasing is as under:
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