Novak Limited has entered into an agreement to lease manufacturing equipment. The following terms are included in the lease: Lease terms Payments required monthly on the last day of the month Leasing interest rate Estimated useful life of equipment PV of lease payments 5 years $3,114 8%/annum 5 years $153,600 The lease is entered into on January 1, 2024. The equipment can be purchased for $160,000. The company uses straight-line depreciation. (a) Prepare the journal entry for 2024 to recognize the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entry before credit entry.)

Novak Limited has entered into an agreement to lease manufacturing equipment. The following terms are included in the lease: Lease terms Payments required monthly on the last day of the month Leasing interest rate Estimated useful life of equipment PV of lease payments 5 years $3,114 8%/annum 5 years $153,600 The lease is entered into on January 1, 2024. The equipment can be purchased for $160,000. The company uses straight-line depreciation. (a) Prepare the journal entry for 2024 to recognize the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entry before credit entry.)

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Novak Limited has entered into an agreement to lease manufacturing equipment. The following terms are included in the lease:
Lease terms
5 years
Payments required monthly on the last day of the month
Leasing interest rate
Estimated useful life of equipment
PV of lease payments
$3,114
8%/annum
5 years
$153,600
The lease is entered into on January 1, 2024. The equipment can be purchased for $160,000. The company uses straight-line
depreciation.
(a)
Prepare the journal entry for 2024 to recognize the lease. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. List all debit entry before credit entry.)
Date
January 1,
2024
Account Titles
Debit
Credit

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