On January 2, 2021, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $174500 residual value of the asset at the end of the lease term. The expected value of the residual value is $62500. Brick’s incremental borrowing rate is 9%, however it knows that Cullumber’s implicit interest rate is 7%. What journal entry would Brick Co. make at January 2, 2021 to record the lease?
On January 2, 2021, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $174500 residual value of the asset at the end of the lease term. The expected value of the residual value is $62500. Brick’s incremental borrowing rate is 9%, however it knows that Cullumber’s implicit interest rate is 7%. What journal entry would Brick Co. make at January 2, 2021 to record the lease?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 2021, Cullumber Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $172000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $174500 residual value of the asset at the end of the lease term. The expected value of the residual value is $62500. Brick’s incremental borrowing rate is 9%, however it knows that Cullumber’s implicit interest rate is 7%. What
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