On January 1, 2020, ABC Company (lessee) leased a machine from Bank XYZ under a 12-month lease. ABC did not record a Right of Use Asset for this agreement. The lease requires ABC to make a single total annual payment of $24,000 on January 1, 202O. The machine was purchased by XYZ Bank on January 1, 2020 at a cost of $70,000 and is expected to have a useful life of 5 years with no expected residual value. Request: Prepare the proper journal entries for lessee ABC (Be sure to show all calculations to receive full punctuation) 1.Journal entry for 1/1/20 2. Journal Entries for 12/31/20

On January 1, 2020, ABC Company (lessee) leased a machine from Bank XYZ under a 12-month lease. ABC did not record a Right of Use Asset for this agreement. The lease requires ABC to make a single total annual payment of $24,000 on January 1, 202O. The machine was purchased by XYZ Bank on January 1, 2020 at a cost of $70,000 and is expected to have a useful life of 5 years with no expected residual value. Request: Prepare the proper journal entries for lessee ABC (Be sure to show all calculations to receive full punctuation) 1.Journal entry for 1/1/20 2. Journal Entries for 12/31/20

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $25,000 beginning January 1, 2024, the beginning of the lease, and on each December 31 thereafter through 2031. The equipment was acquired recently by Crescent at a cost of $180,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. Because the lease term is only nine years, the asset does have an expected residual value at the end of the lease term of $50,995. Crescent seeks a 10% return on its lease investments. By this arrangement, the lease is deemed to be a finance lease. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: What will be the effect of the lease on Café Med’s earnings for the first year (ignore taxes)? Note: Enter decreases with negative sign. What will be…
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