On January 1, 2025, Sheridan Animation sold a truck to Sunland Finance for $50,000 and immediately leased it back. The truck was carried on Sheridan's books at $45,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Sheridan at lease-end. The lease requires three equal rental payments of $15,200 at the end of each year (first payment on January 1, 2026). The appropriate rate of interest is 6%, 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 Sheridan'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. 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 Lease Liability Right-of-Use Asset Debit 50000 39890 JOD 15200 Credit 45000 5000 000 GO 39890
On January 1, 2025, Sheridan Animation sold a truck to Sunland Finance for $50,000 and immediately leased it back. The truck was carried on Sheridan's books at $45,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer to Sheridan at lease-end. The lease requires three equal rental payments of $15,200 at the end of each year (first payment on January 1, 2026). The appropriate rate of interest is 6%, 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 Sheridan'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. 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 Lease Liability Right-of-Use Asset Debit 50000 39890 JOD 15200 Credit 45000 5000 000 GO 39890
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
7
Transcribed Image Text:On January 1, 2025, Sheridan Animation sold a truck to Sunland Finance for $50,000 and immediately leased it back. The truck was
carried on Sheridan's books at $45,000. The term of the lease is 3 years, there is no bargain purchase option, and title does not transfer
to Sheridan at lease-end. The lease requires three equal rental payments of $15,200 at the end of each year (first payment on January
1, 2026). The appropriate rate of interest is 6%, 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 Sheridan'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.
Date
1/1/25
1/1/25
12/31/25
V
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
Lease Liability
Right-of-Use Asset
Debit
50000
39890
ODA
15200
Credit
45000
5000
JA VOL
39890
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