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Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payment c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)

Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payment c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On March 31, 2020, Ahlam Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Ahlam to make annual payments of $10,485 starting April 1, 2021. The machine has an estimated useful life of 6 years. Ahlam uses the straight-line method of depreciation for all of its plant assets. Ahlam's incremental borrowing rate is 8%. The lessee is aware that the lessor used an implicit rate of 10% in computing the lease payments (present value factor for 5 periods at 8%, 3.993; at 10%, 3.791). Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payments c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)
Transcribed Image Text:On March 31, 2020, Ahlam Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Ahlam to make annual payments of $10,485 starting April 1, 2021. The machine has an estimated useful life of 6 years. Ahlam uses the straight-line method of depreciation for all of its plant assets. Ahlam's incremental borrowing rate is 8%. The lessee is aware that the lessor used an implicit rate of 10% in computing the lease payments (present value factor for 5 periods at 8%, 3.993; at 10%, 3.791). Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payments c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)
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