Ivanhoe enters into an agreement with Oriole Inc. to lease a car on December 31, 2024. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term. The fair value of the car was $14,725 at commencement of the lease. Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2025. The first payment is to be of an amount of $5,451.00, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be $5,723.55 and the third and final payment will be $6,009.73). Ivanhoe' incremental borrowing rate is 8%. The rate implicit in the lease is unknown. Ivanhoe uses straight-line depreciation for all similar cars. (a) Prepare Ivanhoe' journal entries for 2024, 2025, and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 2 decimal places, e.g. 5,275.25. Record journal entries in the order presented in the problem.)
Ivanhoe enters into an agreement with Oriole Inc. to lease a car on December 31, 2024. The following information relates to this agreement. 1. 2. 3. 4. 5. The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term. The fair value of the car was $14,725 at commencement of the lease. Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2025. The first payment is to be of an amount of $5,451.00, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be $5,723.55 and the third and final payment will be $6,009.73). Ivanhoe' incremental borrowing rate is 8%. The rate implicit in the lease is unknown. Ivanhoe uses straight-line depreciation for all similar cars. (a) Prepare Ivanhoe' journal entries for 2024, 2025, and 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 2 decimal places, e.g. 5,275.25. Record journal entries in the order presented in the problem.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ivanhoe enters into an agreement with Oriole Inc. to lease a car on December 31, 2024. The following information relates to this
agreement.
1.
2.
3.
4.
5.
The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of
the car is 3 years, and it is expected to have no residual value at the end of the lease term.
The fair value of the car was $14,725 at commencement of the lease.
Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31,
2025. The first payment is to be of an amount of $5,451.00, with each payment increasing by a constant rate of 5% from the
previous payment (i.e., the second payment will be $5,723.55 and the third and final payment will be $6,009.73).
Ivanhoe' incremental borrowing rate is 8%. The rate implicit in the lease is unknown.
Ivanhoe uses straight-line depreciation for all similar cars.
(a) Prepare Ivanhoe' journal entries for 2024, 2025, and 2026. (List all debit entries before credit entries. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter o for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 2
decimal places, e.g. 5,275.25. Record journal entries in the order presented in the problem.)
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