Mason Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2023, to lease equipment from Chang Ltd. The following data are relevant to the lease agreement: 1. The term of the lease is 4 years, with no renewal option. Payments of $126,807 are due on June 30 of each year, with the first payment due June 30, 2024. 2. The fair value of the equipment on July 1, 2023 is $420,000. The equipment has an economic life of 6 years with no residual value. 3. Mason depreciates similar equipment it owns on straight-line basis. 4. The lessor used an implicit rate of 8% in calculating the lease payments. Instructions
Mason Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2023, to lease equipment from Chang Ltd. The following data are relevant to the lease agreement: 1. The term of the lease is 4 years, with no renewal option. Payments of $126,807 are due on June 30 of each year, with the first payment due June 30, 2024. 2. The fair value of the equipment on July 1, 2023 is $420,000. The equipment has an economic life of 6 years with no residual value. 3. Mason depreciates similar equipment it owns on straight-line basis. 4. The lessor used an implicit rate of 8% in calculating the lease payments. Instructions
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please explain answer in detail describe each and every point and step with full explantion , computation , formulation thanks
Transcribed Image Text:Mason Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2023, to lease equipment from Chang Ltd. The following data
are relevant to the lease agreement:
1. The term of the lease is 4 years, with no renewal option. Payments of $126,807 are due on June 30 of each year, with the first payment due June 30, 2024.
2. The fair value of the equipment on July 1, 2023 is $420,000. The equipment has an economic life of 6 years with no residual value.
3. Mason depreciates similar equipment it owns on straight-line basis.
4. The lessor used an implicit rate of 8% in calculating the lease payments.
Instructions
a)
b)
What type of lease is this for Mason? Show your rationale in details.
Prepare the journal entries on Mason's books that relate to the lease agreement for the following dates. Round all amounts to the nearest dollar.
July 1, 2023
December 31, 2023
July 1, 2024
i)
ii)
iii)
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