On January 1, 2025, a machine was purchased for $1,040, 000 by Metlock 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 Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562, 500, though this amount is unguaranteed. Click here to view factor tables. ( For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ eTextbook and Media List of Accounts Attempts: 1 of 4 used (b) Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select " No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 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)
On January 1, 2025, a machine was purchased for $1,040, 000 by Metlock 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 Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the end of the lease term of $562, 500, though this amount is unguaranteed. Click here to view factor tables. ( For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is correct. How much should Metlock report as income before income tax on this lease for 2025? Income before income tax $ eTextbook and Media List of Accounts Attempts: 1 of 4 used (b) Record the journal entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select " No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On January 1, 2025, a machine was purchased for $1,040, 000 by Metlock 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 Ivanhoe Inc. for 3 years on January 1, 2025, with annual rent payments of $260,000 due at the
beginning of each year, starting January 1, 2025. The machine is expected to have a residual value at the
end of the lease term of $562, 500, though this amount is unguaranteed. Click here to view factor tables. (
For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your answer is
correct. How much should Metlock report as income before income tax on this lease for 2025? Income
before income tax $ eTextbook and Media List of Accounts Attempts: 1 of 4 used (b) Record the journal
entries Ivanhoe would record for 2025 on this lease, assuming its incremental borrowing rate is 5% and the
rate implicit in the lease is unknown. (List all debit entries before credit entries. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "
No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 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)
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