Larkspur Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $ 64,298 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $ 230,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Larkspur’s 2019 and 2020 journal entries, assuming Larkspur depreciates similar equipment it owns on a straight-line basis.
Larkspur Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $ 64,298 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $ 230,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%. Prepare Larkspur’s 2019 and 2020 journal entries, assuming Larkspur depreciates similar equipment it owns on a straight-line basis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Larkspur Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $ 64,298 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $ 230,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 8%.
Prepare Larkspur’s 2019 and 2020
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