LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Sunland, Inc. for 3 years. The lease calls for annual lease payments of $15,000 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 fina answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/25 1/1/25 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Debit 42891 II 15000 Credit 42891 15000
LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Sunland, Inc. for 3 years. The lease calls for annual lease payments of $15,000 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 fina answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/25 1/1/25 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Debit 42891 II 15000 Credit 42891 15000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Sunland, Inc. for 3 years. The lease calls for
annual lease payments of $15,000 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
1/1/25
1/1/25
Account Titles and Explanation
Right-of-Use Asset
Lease Liability
(To record lease liability)
Lease Liability
Cash
(To record lease payment)
Debit
42891
15000
Credit
42891
15000
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