On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make five annual payments of P13,000 beginning January 1, 20x7. Babson expects to pay P10,000 on the residual value guarantee. The interest rate implicit in the lease is 9%. Babson's recorded lease liability on initial recognition is a. 48,620 b. 44,070 c. 35,620 d. 31,070

On January 1, 20x7, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make five annual payments of P13,000 beginning January 1, 20x7. Babson expects to pay P10,000 on the residual value guarantee. The interest rate implicit in the lease is 9%. Babson's recorded lease liability on initial recognition is a. 48,620 b. 44,070 c. 35,620 d. 31,070

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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Tartufo Corp. entered into a 6-year lease agreement with Gelato Inc. to lease equipment beginning on January 1, 20X5. The IBR is 7% while the rate implicit in the lease is 6%. Tartufo Corp. is aware of the rate implicit in the lease. Annual payments of $57,500 at the beginning of the year are required. The lease stipulates a $42,000 residual value guarantee but Tartufo Corp. expects a $12,000 payout will be required. Tartufo Corp. will return the equipment to Gelato Inc. at the end of the lease term. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: Provide journal entries pertaining to this lease for Tartufo Corp. for the 20X5 year. Tartufo Corp. uses straight-line depreciation for similar assets, with a half-year of deprecation recorded in the year of acquisition. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to…
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