On January 2, 2021, Sandhill Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $168000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $168500 residual value of the asset at the end of the lease term. The expected value of the residual value is $60500. Brick's incremental borrowing rate is 10%, however it knows that Sandhill's implicit interest rate is 8%. What journal entry would Brick Co. make at January 2, 2021 to record the lease? 8%, 5 periods 10%, 5 periods PV Annuity Due 4.31213 4.16987 PV Ordinary Annuity 3.99271 3.79079 PV Single Sum 0.68058 0.62092
On January 2, 2021, Sandhill Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $168000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $168500 residual value of the asset at the end of the lease term. The expected value of the residual value is $60500. Brick's incremental borrowing rate is 10%, however it knows that Sandhill's implicit interest rate is 8%. What journal entry would Brick Co. make at January 2, 2021 to record the lease? 8%, 5 periods 10%, 5 periods PV Annuity Due 4.31213 4.16987 PV Ordinary Annuity 3.99271 3.79079 PV Single Sum 0.68058 0.62092
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: acc
Transcribed Image Text:On January 2, 2021, Sandhill Leasing Company leases equipment to Brick Co. with 5 equal annual payments of
$168000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $168500 residual value of the
asset at the end of the lease term. The expected value of the residual value is $60500. Brick's incremental borrowing
rate is 10%, however it knows that Sandhill's implicit interest rate is 8%. What journal entry would Brick Co. make at
January 2, 2021 to record the lease?
8%, 5
periods
10%, 5
periods
PV Annuity
Due
4.31213
4.16987
PV Ordinary
Annuity
3.99271
3.79079
PV Single Sum
0.68058
0.62092
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