Answered: January 1, 2020, Bridgeport Company…

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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Problem 21-02 b-f

On January 1, 2020, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $145,088 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $605,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport’s incremental borrowing rate is 6%, and the implicit rate in the lease is 10%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.

Prepare the journal entries that Bridgeport should record on January 1, 2020

Date	Account Titles and Explanation	Debit	Credit
January 1, 2020	enter an account title To record the lease	enter a debit amount	enter a credit amount
	enter an account title To record the lease	enter a debit amount	enter a credit amount
	(To record the lease.)
	enter an account title To record lease payment	enter a debit amount	enter a credit amount
	enter an account title To record lease payment	enter a debit amount	enter a credit amount
	(To record lease payment.)

Prepare the journal entries to record amortization of the leased asset and interest expense for the year 2020

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020	enter an account title To record amortization of the leased asset	enter a debit amount	enter a credit amount
	enter an account title To record amortization of the leased asset	enter a debit amount	enter a credit amount
	(To record amortization of the leased asset.)
December 31, 2020	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

Prepare the journal entry to record the lease payment of January 1, 2021, assuming reversing entries are not made

Date	Account Titles and Explanation	Debit	Credit
January 1, 2021	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

What amounts will appear on the lessee’s December 31, 2020, balance sheet relative to the lease contract?

BRIDGEPORT COMPANY Balance Sheet (Partial) choose the accounting period December 31, 2020
Assets
select an opening section name Current Assets Current Liabilities Intangible Assets Long-term Investments Noncurrent Liabilities Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity Noncurrent Assets
enter an account title		$enter a dollar amount
Liabilities
select an opening name for section one Current Assets Current Liabilities Intangible Assets Long-term Investments Noncurrent Liabilities Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity
enter an account title		$enter a dollar amount
select an opening name for section two Current Assets Current Liabilities Expenses Intangible Assets Long-term Investments Noncurrent Liabilities Net Income / (Loss) Property, Plant and Equipment Revenues Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Expenses Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Revenues Total Stockholders' Equity
enter an account title		$enter a dollar amount

How would the value of the lease liability in part b change if Bridgeport also agreed to pay the fixed annual insurance on the equipment of $2,000 at the same time as the rental payments? (Round answers to 0 decimal places, e.g. 5,275.)

The lease liability

$enter the lease liability in dollars

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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