Flint Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased.
Flint Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Flint Corporation leases equipment from Falls Company on January 1, 2025. The lease agreement does not transfer ownership,
contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment's 8-year useful life, and the present
value of the lease payments is less than 90% of the fair value of the asset leased.
Prepare Flint's journal entries on January 1, 2025, and December 31, 2025. Assume the annual lease payment is $50,000 at the
beginning of each year, and Flint's incremental borrowing rate is 8%, which is the same as the lessor's implicit rate. (List all debit entries
before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation
purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, eg. 5,265. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
1/1/25
12/31/25
Account Titles and Explanation
Right-of-Use Asset
Lease Liability
(To record lease liability)
" Unearned Lease Revenue
Lease Revenue
(To record lease payment)
Debit
50000
50000
Credit
50000
50000
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