ed: Calculate the yearly payment that Alexis will charge Edgar under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/19. a. o. Prepare all journal entries that would be made by Alexis (lessor) during 2019 and 2020 relating to this lease. . Prepare all journal entries that would be made by Edgar (lessee) during 2019 and 2020 relating to this lease.
ed: Calculate the yearly payment that Alexis will charge Edgar under this lease agreement if payments are made on 1/1 of each year, beginning 1/1/19. a. o. Prepare all journal entries that would be made by Alexis (lessor) during 2019 and 2020 relating to this lease. . Prepare all journal entries that would be made by Edgar (lessee) during 2019 and 2020 relating to this lease.
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 3E: Lessee Accounting Issues Sax Company signs a lease agreement dated January 1, 2019, that provides...
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Question
![**Lease Asset Example: Alexis Computer Company**
**Introduction:**
Alexis Computer Company manufactures and sells or leases various types of computer equipment. On January 1, 2019, Alexis leased a complete computer system to Edgar Enterprises. The relevant data relating to the lease are as follows:
| **Lease Data** | **Amount** |
|--------------------------------------------------|------------|
| Cost of equipment to Alexis | $80,000 |
| Fair market value of equipment at 1/1/19 | $98,000 |
| Useful life of equipment | 8 years |
| Lease term | 5 years |
| Residual value at the end of the lease (not guaranteed by Edgar) | $15,000 |
| Implicit and incremental interest rates | 10% |
| Initial direct costs incurred in negotiation | $1,000 |
**Depreciation Method**: Both the lessor and lessee use straight-line depreciation and have accounting periods that end on December 31.
**Required:**
**a. Calculate the yearly payment that Alexis will charge Edgar under this lease agreement if payments are made on January 1 of each year, beginning January 1, 2019.**
**b. Prepare all journal entries that would be made by Alexis (lessor) during 2019 and 2020 relating to this lease.**
**c. Prepare all journal entries that would be made by Edgar (lessee) during 2019 and 2020 relating to this lease.**
**d. Prepare the journal entries made by both Alexis and Edgar with respect to the lease termination if the actual residual value of the computer equipment is $12,500.**
---
**Graph/Diagram Explanation:**
There are no graphs or diagrams in the provided text. All information is presented in a tabular format for clarity on financial values and lease terms.
---
This example can be used as a case study for understanding the application of lease accounting under current financial reporting standards, offering a practical approach to both lessor and lessee accounting for leased assets.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F98a825cc-9eb3-46df-8bba-91c1e0af5ccb%2F7be13089-d0e6-4099-9f95-7de979ca1e46%2F6jiv2b.png&w=3840&q=75)
Transcribed Image Text:**Lease Asset Example: Alexis Computer Company**
**Introduction:**
Alexis Computer Company manufactures and sells or leases various types of computer equipment. On January 1, 2019, Alexis leased a complete computer system to Edgar Enterprises. The relevant data relating to the lease are as follows:
| **Lease Data** | **Amount** |
|--------------------------------------------------|------------|
| Cost of equipment to Alexis | $80,000 |
| Fair market value of equipment at 1/1/19 | $98,000 |
| Useful life of equipment | 8 years |
| Lease term | 5 years |
| Residual value at the end of the lease (not guaranteed by Edgar) | $15,000 |
| Implicit and incremental interest rates | 10% |
| Initial direct costs incurred in negotiation | $1,000 |
**Depreciation Method**: Both the lessor and lessee use straight-line depreciation and have accounting periods that end on December 31.
**Required:**
**a. Calculate the yearly payment that Alexis will charge Edgar under this lease agreement if payments are made on January 1 of each year, beginning January 1, 2019.**
**b. Prepare all journal entries that would be made by Alexis (lessor) during 2019 and 2020 relating to this lease.**
**c. Prepare all journal entries that would be made by Edgar (lessee) during 2019 and 2020 relating to this lease.**
**d. Prepare the journal entries made by both Alexis and Edgar with respect to the lease termination if the actual residual value of the computer equipment is $12,500.**
---
**Graph/Diagram Explanation:**
There are no graphs or diagrams in the provided text. All information is presented in a tabular format for clarity on financial values and lease terms.
---
This example can be used as a case study for understanding the application of lease accounting under current financial reporting standards, offering a practical approach to both lessor and lessee accounting for leased assets.
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