On 1 January 20X2 Grocers R Us entered into a lease to rent a mid-sized tractor trailer from TT Inc. with the following terms: • The company will rent a tractor-trailer beginning 1 April 20X2 for a 4-year period. The fair value of the trailer is $298,000 and has a useful life of 8 years. The expected residual value is $95,000. • Lease payments are due at the beginning of the year; • The asset reverts to the lessor at the end of the lease term. The lessee does not have any residual value guarantees. • TT's incremental borrowing rate is 7.4%, the rate implicit in the lease is 8.4% (which is known to the lessee). (PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the lease payment. Lease payment 2. Prepare the journal entries for the 20x2, 20X3, and 20X4 fiscal years. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

On 1 January 20X2 Grocers R Us entered into a lease to rent a mid-sized tractor trailer from TT Inc. with the following terms: • The company will rent a tractor-trailer beginning 1 April 20X2 for a 4-year period. The fair value of the trailer is $298,000 and has a useful life of 8 years. The expected residual value is $95,000. • Lease payments are due at the beginning of the year; • The asset reverts to the lessor at the end of the lease term. The lessee does not have any residual value guarantees. • TT's incremental borrowing rate is 7.4%, the rate implicit in the lease is 8.4% (which is known to the lessee). (PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the lease payment. Lease payment 2. Prepare the journal entries for the 20x2, 20X3, and 20X4 fiscal years. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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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