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On January 1, 2025, Carla Vista Company leased equipment to Sandhill Corporation. The following information pertains to this lease. The term of the non-cancelable lease is 6 years. At the end of the lease term, Sandhill has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $5,000. Equal rental payments are due on January 1 of each year, beginning in 2025. The fair value of the equipment on January 1, 2025, is $125,000, and its cost is $90,000. The equipment has an economic life of 8 years. Sandhill depreciates all of its equipment on a straight-line basis. Carla Vista set the annual rental to ensure a 6% rate of return. Sandhill's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. 1. 2. 3. 4. 5. 6. Both the lessor and the lessee's accounting periods end on December 31.

On January 1, 2025, Carla Vista Company leased equipment to Sandhill Corporation. The following information pertains to this lease. The term of the non-cancelable lease is 6 years. At the end of the lease term, Sandhill has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $5,000. Equal rental payments are due on January 1 of each year, beginning in 2025. The fair value of the equipment on January 1, 2025, is $125,000, and its cost is $90,000. The equipment has an economic life of 8 years. Sandhill depreciates all of its equipment on a straight-line basis. Carla Vista set the annual rental to ensure a 6% rate of return. Sandhill's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. 1. 2. 3. 4. 5. 6. Both the lessor and the lessee's accounting periods end on December 31.

FINANCIAL ACCOUNTING
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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73/25 1/25 1/31/25 Lease Receivable Cost of Goods Sold Sales Revenge Inventory (To record the lease) Cash Lease Receivable (To record lease payment) Lease Receivable Interest Revenue 90000 21278 6223 125000 9000X 21278 6223
Transcribed Image Text:73/25 1/25 1/31/25 Lease Receivable Cost of Goods Sold Sales Revenge Inventory (To record the lease) Cash Lease Receivable (To record lease payment) Lease Receivable Interest Revenue 90000 21278 6223 125000 9000X 21278 6223
On January 1, 2025, Carla Vista Company leased equipment to Sandhill Corporation. The following information pertains to this lease. The term of the non-cancelable lease is 6 years. At the end of the lease term, Sandhill has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $5,000. 1. 2. 3. 4. 5. 6. Equal rental payments are due on January 1 of each year, beginning in 2025. The fair value of the equipment on January 1, 2025, is $125,000, and its cost is $90,000. The equipment has an economic life of 8 years. Sandhill depreciates all of its equipment on a straight-line basis. Carla Vista set the annual rental to ensure a 6% rate of return. Sandhill's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31.
Transcribed Image Text:On January 1, 2025, Carla Vista Company leased equipment to Sandhill Corporation. The following information pertains to this lease. The term of the non-cancelable lease is 6 years. At the end of the lease term, Sandhill has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $5,000. 1. 2. 3. 4. 5. 6. Equal rental payments are due on January 1 of each year, beginning in 2025. The fair value of the equipment on January 1, 2025, is $125,000, and its cost is $90,000. The equipment has an economic life of 8 years. Sandhill depreciates all of its equipment on a straight-line basis. Carla Vista set the annual rental to ensure a 6% rate of return. Sandhill's incremental borrowing rate is 8%, and the implicit rate of the lessor is unknown. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee's accounting periods end on December 31.
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