On January 1, 2020, a machine was purchased for $1.060,000 by Marin Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Cullumber Inc. for 3 years on January 1. 2020, with annual rent payments of $250,000 due at the beginning of each year, starting January 1, 2020. The machine is expected to have a residual value at the end of the lease term of $562.500, though this amount is unguaranteed. Record the journal entries Cullumber would record for 2020 on this lease, assuming its incremental borrowing rate is 95% and the rate implicit in the lease is unknown. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, eg. 5,275. Record journal entries in the order presented in the problem) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment) Suppose the lease was only for one year (only one payment of the same amount at commencement of the lease), with a renewal option at market rates at the end of the lease, and Cullumber elects to use the short-term lease exception. Record the journal entry Cullumber would record for 2020 on this lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20
On January 1, 2020, a machine was purchased for $1.060,000 by Marin Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Cullumber Inc. for 3 years on January 1. 2020, with annual rent payments of $250,000 due at the beginning of each year, starting January 1, 2020. The machine is expected to have a residual value at the end of the lease term of $562.500, though this amount is unguaranteed. Record the journal entries Cullumber would record for 2020 on this lease, assuming its incremental borrowing rate is 95% and the rate implicit in the lease is unknown. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to O decimal places, eg. 5,275. Record journal entries in the order presented in the problem) Date Account Titles and Explanation Debit Credit (To record the lease) (To record lease payment) Suppose the lease was only for one year (only one payment of the same amount at commencement of the lease), with a renewal option at market rates at the end of the lease, and Cullumber elects to use the short-term lease exception. Record the journal entry Cullumber would record for 2020 on this lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 1/1/20
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On January 1, 2020, a machine was purchased for $1,060,000 by Marin Co. The machine is expected to have an 8-year life with no
salvage value. It is to be depreciated on a straight-line basis. The machine was leased to Cullumber Inc. for 3 years on January 1.
2020, with annual rent payments of $250,000 due at the beginning of each year, starting January 1, 2020. The machine is expected
to have a residual value at the end of the lease term of $562.500, though this amount is unguaranteed.
Record the journal entries Cullumber would record for 2020 on this lease, assuming its incremental borrowing rate is 9% and
the rate implicit in the lease is unknown. (Credit account titles are automatically indented when the amount is entered. Do not indent
manually. Round answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)
Date
Account Titles and Explanation
Debit
Credit
(To record the lease)
(To record lease payment)
Suppose the lease was only for one year (only one payment of the same amount at commencement of the lease), with a renewal
option at market rates at the end of the lease, and Cullumber elects to use the short-term lease exception. Record the journal
entry Cullumber would record for 2020 on this lease. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually.)
Date Account Titles and Explanation
Debit
Credit
1/1/20
>
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