Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 9%. (Credit account titles are

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
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LeBron James (LBJ) Corporation agrees on January
1, 2025, to lease equipment from Wildhorse, Inc. for
3 years. The lease calls for annual lease payments of
$18,000 at the beginning of each year. The lease
does not transfer ownership, nor does it contain a
bargain purchase option, and is not a specialized
asset. In addition, the useful life of the equipment is
10 years, and the present value of the lease
payments is less than 90% of the fair value of the
equipment.
Prepare LBJ's journal entries on January 1, 2025
(commencement of the operating lease), and on
December 31, 2025. Assume the implicit rate used
by the lessor is unknown, and LBJ's incremental
borrowing rate is 9%. (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. List all debit entries
before credit entries. For calculation purposes,
use 5 decimal places as displayed in the factor
table provided and round final answers to 0
decimal places, e.g. 5,275. Record j SUPPORT
in the order presented in the problem.
Mck here to view factor tables.
Transcribed Image Text:LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Wildhorse, Inc. for 3 years. The lease calls for annual lease payments of $18,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Prepare LBJ's journal entries on January 1, 2025 (commencement of the operating lease), and on December 31, 2025. Assume the implicit rate used by the lessor is unknown, and LBJ's incremental borrowing rate is 9%. (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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,275. Record j SUPPORT in the order presented in the problem. Mck here to view factor tables.
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