On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $19,500 due on December 31 of each year, calculated by the lessor using a 6% interest rate. The agreement is considered an operating 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: 1.Prepare Rick's journal entry to record for the right-of-use asset and lease liability on January 1, 2024. 2.Prepare the journal entries to record interest and amortization on December 31, 2024.
On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $19,500 due on December 31 of each year, calculated by the lessor using a 6% interest rate. The agreement is considered an operating 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: 1.Prepare Rick's journal entry to record for the right-of-use asset and lease liability on January 1, 2024. 2.Prepare the journal entries to record interest and amortization on December 31, 2024.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend
the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the
three-year extension option. Annual lease payments are $19,500 due on December 31 of each year, calculated by the
lessor using a 6% interest rate. The agreement is considered an operating 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:
1.Prepare Rick's journal entry to record for the right-of-use asset and lease liability on January 1, 2024.
2.Prepare the journal entries to record interest and amortization on December 31, 2024.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8919ab5c-8711-4156-99f2-7f4800869254%2F94ebec64-b40a-46cd-ad42-7300ef45e121%2Fv71eowa_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a seven-year period with an option to extend
the lease for three years. Rick's had no significant economic incentive as of the beginning of the lease to exercise the
three-year extension option. Annual lease payments are $19,500 due on December 31 of each year, calculated by the
lessor using a 6% interest rate. The agreement is considered an operating 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:
1.Prepare Rick's journal entry to record for the right-of-use asset and lease liability on January 1, 2024.
2.Prepare the journal entries to record interest and amortization on December 31, 2024.
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