On January 1, 2020, Wildhorse Company contracts to lease equipment for 5 years, agreeing to make a payment of $151,860 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $623,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Wildhorse's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Wildhorse. Title to the equipment transfers to Wildhorse at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (b) Prepare the journal entries that Wildhorse should record on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to 0 decimal places, eg. 5,275) Date January 1, 2020 Account Titles and Explanation (To record the lease.) (To record lease payment.) Debit Credit
On January 1, 2020, Wildhorse Company contracts to lease equipment for 5 years, agreeing to make a payment of $151,860 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $623,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Wildhorse's incremental borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Wildhorse. Title to the equipment transfers to Wildhorse at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Click here to view factor tables. (b) Prepare the journal entries that Wildhorse should record on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to 0 decimal places, eg. 5,275) Date January 1, 2020 Account Titles and Explanation (To record the lease.) (To record lease payment.) Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2020, Wildhorse Company contracts to lease equipment for 5 years, agreeing to make a payment of $151,860 at the
beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $623,000. The asset is to be amortized
on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Wildhorse's incremental
borrowing rate is 6%, and the implicit rate in the lease is 11%, which is known by Wildhorse. Title to the equipment transfers to
Wildhorse at the end of the lease. The asset has an estimated useful life of 5 years and no residual value.
Click here to view factor tables.
(b)
Prepare the journal entries that Wildhorse should record on January 1, 2020. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts
Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to 0 decimal places, e.g. 5,275)
Date
January
1,2020
Account Titles and Explanation
(To record the lease.)
(To record lease payment.)
Debit
Credit
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