On 1 March 20X4, Machine Manufacturing Co. leased a machine to Dry Goods through a three-year lease. The annual lease payments of $19,400 start on 1 March 20X4, and continue for three years. The interest rate implicit in the lease is 9% and the machine will remain with the lessee at the end of the lease. Machines of this type are usually sold for $53,527 with a cost to Machine Manufacturing Co. of $10,400 to build. Required: 1. Should this lease be accounted for as a financing - type lease or a manufacturer or dealer - type lease? multiple choice Finance lease Sales lease 2. What journal entries should be recorded on March 1, 20X 4? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
On 1 March 20X4, Machine Manufacturing Co. leased a machine to Dry Goods through a three-year lease. The annual lease payments of $19,400 start on 1 March 20X4, and continue for three years. The interest rate implicit in the lease is 9% and the machine will remain with the lessee at the end of the lease. Machines of this type are usually sold for $53,527 with a cost to Machine Manufacturing Co. of $10,400 to build. Required: 1. Should this lease be accounted for as a financing - type lease or a manufacturer or dealer - type lease? multiple choice Finance lease Sales lease 2. What journal entries should be recorded on March 1, 20X 4? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On 1 March 20X4, Machine Manufacturing Co. leased a machine to Dry Goods through a
three-year lease. The annual lease payments of $19,400 start on 1 March 20X4, and continue
for three years. The interest rate implicit in the lease is 9% and the machine will remain with
the lessee at the end of the lease. Machines of this type are usually sold for $53,527 with a
cost to Machine Manufacturing Co. of $10,400 to build. Required: 1. Should this lease be
accounted for as a financing - type lease or a manufacturer or dealer - type lease? multiple
choice Finance lease Sales lease 2. What journal entries should be recorded on March 1, 20X
4? (If no entry is required for a transaction/event, select "No journal entry required" in the first
account field.)
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