On December 31, 2020, Sunland Company leased a truck from K Co.. The lease calls for $41,934 equal rental payment at the beginning of each year of the lease period. The annual rental payment starts from December 31, 2020. The lease term is 4 years. The fair value of the truck on December 31, 2020 is $150,001. Estimated useful life of the truck is 4 years and estimated salvage value is nil. The interest rate is 8%. Prepare journal entry to record interest expense as on December 31,2021, assuming the Sunland Company uses straight-line method of depreciation to depreciate a similar truck it owns.
On December 31, 2020, Sunland Company leased a truck from K Co.. The lease calls for $41,934 equal rental payment at the beginning of each year of the lease period. The annual rental payment starts from December 31, 2020. The lease term is 4 years. The fair value of the truck on December 31, 2020 is $150,001. Estimated useful life of the truck is 4 years and estimated salvage value is nil. The interest rate is 8%. Prepare journal entry to record interest expense as on December 31,2021, assuming the Sunland Company uses straight-line method of depreciation to depreciate a similar truck it owns.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, Sunland Company leased a truck from K Co.. The lease calls for $41,934 equal rental payment at the beginning of each year of the lease period. The annual rental payment starts from December 31, 2020. The lease term is 4 years. The fair value of the truck on December 31, 2020 is $150,001. Estimated useful life of the truck is 4 years and estimated salvage value is nil. The interest rate is 8%.
Prepare journal entry to record interest expense as on December 31,2021, assuming the Sunland Company uses straight-line method of depreciation to depreciate a similar truck it owns.
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