Oriole Dairy leases its milking equipment from Waterway Finance Company under the following lease terms. The lease term is 10 years, noncancelable, and requires equal rental payments of $29.400 due at the beginning of each year starting January 1,2020. 1. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $222.184 and a cost of $231,000 on Waterway Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $14.100. though Oriole Dairy has guaranteed a residual value of $19.700 to Waterway Finance. 2. The lease contains no renewal options, and the equipment reverts to Waterway Finance upon termination of the lease. The equipment is not of a specialized use. 3. 4. Oriole Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. 5. Oriole Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

please help me to solve this problem

Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31,
lessee's and lessor's year-end). Assume no reversing entries. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select "No
Entry" for the account titles and enter 0 for the amounts. Round present value factor
calculations to 5 decimal places, e.g. 1.25125 and final answers to 0 decimal places, e.g. 5,250.)
Transcribed Image Text:Prepare the journal entries for the lessee and lessor at January 1, 2020, and December 31, lessee's and lessor's year-end). Assume no reversing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25125 and final answers to 0 decimal places, e.g. 5,250.)
Oriole Dairy leases its milking equipment from Waterway Finance Company under the following lease terms.
The lease term is 10 years, noncancelable, and requires equal rental payments of $29,400 due at the beginning of each year
starting January 1,2020.
1.
The equipment has a fair value at the commencement of the lease (January 1, 2020) of $222.184 and a cost of $231.000 on
Waterway Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $14,100,
though Oriole Dairy has guaranteed a residual value of $19.700 to Waterway Finance.
2.
The lease contains no renewal options, and the equipment reverts to Waterway Finance upon termination of the lease. The
equipment is not of a specialized use.
4.
Oriole Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%.
Oriole Dairy depreciates similar equipment that it owns on a straight-line basis.
6.
Collectibility of the payments is probable.
3.
5.
Transcribed Image Text:Oriole Dairy leases its milking equipment from Waterway Finance Company under the following lease terms. The lease term is 10 years, noncancelable, and requires equal rental payments of $29,400 due at the beginning of each year starting January 1,2020. 1. The equipment has a fair value at the commencement of the lease (January 1, 2020) of $222.184 and a cost of $231.000 on Waterway Finance's books. It also has an estimated economic life of 15 years and an expected residual value of $14,100, though Oriole Dairy has guaranteed a residual value of $19.700 to Waterway Finance. 2. The lease contains no renewal options, and the equipment reverts to Waterway Finance upon termination of the lease. The equipment is not of a specialized use. 4. Oriole Dairy's incremental borrowing rate is 8% per year. The implicit rate is also 8%. Oriole Dairy depreciates similar equipment that it owns on a straight-line basis. 6. Collectibility of the payments is probable. 3. 5.
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Value Chain Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education