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Nancy Leasing Company signs an agreement on January 1, 2025, to lease equipment to Kingbird Company. The following information relates to this agreement. 1 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2025, is $81,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25.909.45 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Kingbird uses the straight-line depreciation method for all equipment.

Nancy Leasing Company signs an agreement on January 1, 2025, to lease equipment to Kingbird Company. The following information relates to this agreement. 1 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2025, is $81,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25.909.45 to the lessor, beginning on January 1, 2025. The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Kingbird uses the straight-line depreciation method for all equipment.

FINANCIAL ACCOUNTING
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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Prepare all of the journal entries for the lessee for 2025 and 2026 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (List all debit entries before credit entries. Credit occount titles are automatically Indented when 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. Round answers to 2 decimal places, eg. 5,275.15. Record Journal entries in the order presented in the problem.) Date 1/1/25 12/31/25 1/1/26 12/31/26 V Y Account Titles and Explanation Right-of-Use Asset Lease Liability (To record the lease) Lease Liability Cash (To record lease payment) (To record interest expense) Debit Credit
Transcribed Image Text:Prepare all of the journal entries for the lessee for 2025 and 2026 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee's annual accounting period ends on December 31. (List all debit entries before credit entries. Credit occount titles are automatically Indented when 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. Round answers to 2 decimal places, eg. 5,275.15. Record Journal entries in the order presented in the problem.) Date 1/1/25 12/31/25 1/1/26 12/31/26 V Y Account Titles and Explanation Right-of-Use Asset Lease Liability (To record the lease) Lease Liability Cash (To record lease payment) (To record interest expense) Debit Credit
Nancy Leasing Company signs an agreement on January 1, 2025, to lease equipment to Kingbird Company. The following information relates to this agreement. 1 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2025, is $81,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25.909.45 to the lessor, beginning on January 1, 2025, The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Kingbird uses the straight-line depreciation method for all equipment.
Transcribed Image Text:Nancy Leasing Company signs an agreement on January 1, 2025, to lease equipment to Kingbird Company. The following information relates to this agreement. 1 2 3. 4. 5. 6. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. The fair value of the asset at January 1, 2025, is $81,000. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. The agreement requires equal annual rental payments of $25.909.45 to the lessor, beginning on January 1, 2025, The lessee's incremental borrowing rate is 5%. The lessor's implicit rate is 4% and is unknown to the lessee. Kingbird uses the straight-line depreciation method for all equipment.
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