Homework Help is Here – Start Your Trial Now!
Business
Accounting
On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-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 $13,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. • The expected useful life of the asset is nine years, and its fair value is $97,500. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 5%. 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 the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment.

On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-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 $13,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. • The expected useful life of the asset is nine years, and its fair value is $97,500. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only if it exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 5%. 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 the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

D1.

Account 

Required 1 Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. View transaction list . " No 1 i 2 3 Date January 01, 2026 No View journal entry worksheet December 31, 2026 1 December 31 2026 View transaction list 2 Show Transcribed Text Required 2 Right-of-use asset Lease payable Date January 01, 2026 Interest expense Amortization expense Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment. Interest expense Amortization expense Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. December 31, 2028 General Journal View journal entry worksheet Interest expense Lease payable Cash S Show Transcribed Text Amortization expense Right-of-use asset Debit General Journal Credit Debit Show less A Credit Ⓒ Show lessA
Transcribed Image Text:Required 1 Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. View transaction list . " No 1 i 2 3 Date January 01, 2026 No View journal entry worksheet December 31, 2026 1 December 31 2026 View transaction list 2 Show Transcribed Text Required 2 Right-of-use asset Lease payable Date January 01, 2026 Interest expense Amortization expense Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment. Interest expense Amortization expense Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. December 31, 2028 General Journal View journal entry worksheet Interest expense Lease payable Cash S Show Transcribed Text Amortization expense Right-of-use asset Debit General Journal Credit Debit Show less A Credit Ⓒ Show lessA
On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-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 $13,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. • The expected useful life of the asset is nine years, and Its fair value is $97,500. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only If It exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 5%. 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 the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment.
Transcribed Image Text:On January 1, 2024, Rick's Pawn Shop leased a truck from Corey Motors for a six-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 $13,000 due on December 31 of each year, calculated by the lessor using a 4% discount rate. • The expected useful life of the asset is nine years, and Its fair value is $97,500. • Assume that at the beginning of the third year, January 1, 2026, Rick's had made significant improvements to the truck whose cost could be recovered only If It exercises the extension option, creating an expectation that extension of the lease was "reasonably certain." • The relevant interest rate at that time was 5%. 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 the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessee to account for the reassessment. 2. Prepare the journal entry, if any, on January 1 and on December 31 of the third year, 2026 for the lessor to account for the reassessment.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Lease accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS