Ivanhoelnc. leased a new crane to Bridgeport Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $49,000 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $241,920, and a cost to Ivanhoe of $241,920. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Ivanhoe and Bridgeport adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bridgeport's incremental borrowing rate is 8%, and Ivanhoe's implicit interest rate of 8% is known to Bridgeport. Click here to view factor tables. Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Bridgeport uses straight-line amortization for all similar leased assets, and Ivanhoe depreciates the asset on a straight-line basis with a salvage value of $14,000. (Credit account titles are automatically indented when 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. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date 1/1/20 1/1/20 Account Titles and Explanation 12/31/20 Lessee's Entries 12/31/20 Right-of-Use Asset Lease Liability (To record lease.) Lease Liability Cash 12/31/20 Lease Expense (To record lease payment.) Lease Liability Lease Liability Right-of-Use Asset 1/1/20 Cash (To record interest and amortization expense.) Lessor's Entries Unearned Lease Revenue (To record the receipt of payment.) Depreciation Expense Accumulated Depreciation Leased Equipment (To record depreciation.) Unearned Lease Revenue Lease Revenue (To record lease revenue.) Debit Credit =
Ivanhoelnc. leased a new crane to Bridgeport Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of the lease require payments of $49,000 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value of $241,920, and a cost to Ivanhoe of $241,920. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both Ivanhoe and Bridgeport adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bridgeport's incremental borrowing rate is 8%, and Ivanhoe's implicit interest rate of 8% is known to Bridgeport. Click here to view factor tables. Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming Bridgeport uses straight-line amortization for all similar leased assets, and Ivanhoe depreciates the asset on a straight-line basis with a salvage value of $14,000. (Credit account titles are automatically indented when 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. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.) Date 1/1/20 1/1/20 Account Titles and Explanation 12/31/20 Lessee's Entries 12/31/20 Right-of-Use Asset Lease Liability (To record lease.) Lease Liability Cash 12/31/20 Lease Expense (To record lease payment.) Lease Liability Lease Liability Right-of-Use Asset 1/1/20 Cash (To record interest and amortization expense.) Lessor's Entries Unearned Lease Revenue (To record the receipt of payment.) Depreciation Expense Accumulated Depreciation Leased Equipment (To record depreciation.) Unearned Lease Revenue Lease Revenue (To record lease revenue.) Debit Credit =
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Nn.121.
Subject :- Account
Transcribed Image Text:IvanhoeInc. leased a new crane to Bridgeport Construction under a 5-year, non-cancelable contract starting January 1, 2020. Terms of
the lease require payments of $49,000 each January 1, starting January 1, 2020. The crane has an estimated life of 7 years, a fair value
of $241,920, and a cost to Ivanhoe of $241,920. The estimated fair value of the crane is expected to be $45,000 (unguaranteed) at the
end of the lease term. No bargain purchase or renewal options are included in the contract, and it is not a specialized asset. Both
Ivanhoe and Bridgeport adjust and close books annually at December 31. Collectibility of the lease payments is probable. Bridgeport's
incremental borrowing rate is 8%, and Ivanhoe's implicit interest rate of 8% is known to Bridgeport.
Click here to view factor tables.
Prepare all the entries related to the lease contract and leased asset for the year 2020 for the lessee and lessor, assuming
Bridgeport uses straight-line amortization for all similar leased assets, and Ivanhoe depreciates the asset on a straight-line basis
with a salvage value of $14,000. (Credit account titles are automatically indented when 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. Round present value factor calculations to 5 decimal
places, e.g. 1.25125 and the final answer to 0 decimal places e.g. 58,972.)
Date
1/1/20
1/1/20
12/31/20
1/1/20
12/31/20
12/31/20
Account Titles and Explanation
Lessee's Entries
Right-of-Use Asset
Lease Liability
(To record lease.)
Lease Liability
Cash
(To record lease payment.)
Lease Expense
Lease Liability
Lease Liability
Right-of-Use Asset
(To record interest and amortization expense.)
Lessor's Entries
Cash
Unearned Lease Revenue
(To record the receipt of payment.)
Depreciation Expense
Accumulated Depreciation-Leased Equipment
(To record depreciation.)
Unearned Lease Revenue
Lease Revenue
(To record lease revenue.)
Debit
Credit
00 00
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