On January 1, 2025, Ivanhoe Animation sold a truck to Oriole Finance for $41,000 and immediately leased it back. The truck was carried on Ivanhoe's books at $33,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Ivanhoe at lease-end. The lease requires three equal rental payments of $11,600 at the end of each year (first payment on January 1,2026). The appropriate rate of interest is 5%, the truck has a useful life of 5 years, and the residual value at the end of the lease term is expected to be $14,000, none of which is guaranteed. Prepare Ivanhoe's 2025 journal entries. (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 O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Click here to view factor tables.
On January 1, 2025, Ivanhoe Animation sold a truck to Oriole Finance for $41,000 and immediately leased it back. The truck was carried on Ivanhoe's books at $33,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Ivanhoe at lease-end. The lease requires three equal rental payments of $11,600 at the end of each year (first payment on January 1,2026). The appropriate rate of interest is 5%, the truck has a useful life of 5 years, and the residual value at the end of the lease term is expected to be $14,000, none of which is guaranteed. Prepare Ivanhoe's 2025 journal entries. (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 O for the amounts. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.) Click here to view factor tables.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2025, Ivanhoe Animation sold a truck to Oriole Finance for $41,000 and immediately leased it back. The truck was
carried on Ivanhoe's books at $33,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer
to Ivanhoe at lease-end. The lease requires three equal rental payments of $11,600 at the end of each year (first payment on January
1,2026). The appropriate rate of interest is 5%, the truck has a useful life of 5 years, and the residual value at the end of the lease term
is expected to be $14,000, none of which is guaranteed.
Prepare Ivanhoe's 2025 journal entries. (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 O for the amounts. For
calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265.
Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
1/1/25
1/1/25
12/31/25
Account Titles and Explanation
Cash
Trucks
Gain on Disposal of Plant Assets
(To record sale of truck)
Right-of-Use Asset
Lease Liability
(To record lease liability)
Lease Expense
Debit
41000
31586
11600
Credit
33000
8000
31586
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