On December 31, Year One, the Dispersion Company decides to lease a piece of equipment rather than buy it. The lease is for 8 years. Payments are $49,000 every December 31 beginning on December 31, Year One. The implicit rate is 11 percent and is known by Dispersion. A. Assume this lease is classified as a finance lease. What journal entries are made in Year One and Year two? B. Assume this lease is classified as an operating lease. What journal entries are made in Year One and Year two?

On December 31, Year One, the Dispersion Company decides to lease a piece of equipment rather than buy it. The lease is for 8 years. Payments are $49,000 every December 31 beginning on December 31, Year One. The implicit rate is 11 percent and is known by Dispersion. A. Assume this lease is classified as a finance lease. What journal entries are made in Year One and Year two? B. Assume this lease is classified as an operating lease. What journal entries are made in Year One and Year two?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. Assume that Garvey is required to make payments on December 31 each year.
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