On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $7,924 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of depreciation for all of its plant assets. Kingbird’s incremental borrowing rate is 2%, and the lessor’s implicit rate is unknown. Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Present value of the lease payments $enter the Present value of the lease payments in dollars Prepare all necessary journal entries for Kingbird for this lease through December 31, 2020.
On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $7,924 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of depreciation for all of its plant assets. Kingbird’s incremental borrowing rate is 2%, and the lessor’s implicit rate is unknown. Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.) Present value of the lease payments $enter the Present value of the lease payments in dollars Prepare all necessary journal entries for Kingbird for this lease through December 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2019, Kingbird Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Kingbird to make annual payments of $7,924 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $5,200 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Kingbird uses the straight-line method of
Compute the present value of the lease payments. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places e.g. 5,275.)
| Present value of the lease payments |
$enter the Present value of the lease payments in dollars
|
Prepare all necessary journal entries for Kingbird for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places e.g. 5,275.)
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
|---|---|---|---|---|
|
choose a transaction date
12/31/1912/31/20
|
enter an account title to record the lease
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title to record the lease
|
enter a debit amount
|
enter a credit amount
|
||
|
(To record the lease)
|
||||
|
choose a transaction date
12/31/1912/31/20
|
enter an account title to record first lease payment
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title to record first lease payment
|
enter a debit amount
|
enter a credit amount
|
||
|
(To record first lease payment)
|
||||
|
choose a transaction date
12/31/1912/31/20
|
enter an account title to record amortization of the right-of-use asset
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title to record amortization of the right-of-use asset
|
enter a debit amount
|
enter a credit amount
|
||
|
(To record amortization of the right-of-use asset)
|
||||
|
enter an account title to record interest expense
|
enter a debit amount
|
enter a credit amount
|
|
|
enter an account title to record interest expense
|
enter a debit amount
|
enter a credit amount
|
||
|
enter an account title to record interest expense
|
enter a debit amount
|
enter a credit amount
|
||
|
(To record interest expense)
|
Please follow instructions the first three journal entries are two entries each the last has 3 entries.
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