LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Carla Vista, Inc. for 3 years. The lease calls for annual lease payments of $24,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 5%. (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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation (To record lease liability) (To record lease payment) Debit Credit
LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Carla Vista, Inc. for 3 years. The lease calls for annual lease payments of $24,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 5%. (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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation (To record lease liability) (To record lease payment) Debit Credit
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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Question
Transcribed Image Text:LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Carla Vista, Inc. for 3 years. The lease calls for annual lease payments of $24,000 at the
beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the
equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment.
Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and
LBJ's incremental borrowing rate is 5%. (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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final
answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
(To record lease liability)
(To record lease payment)
Debit
Credit
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