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 5%. (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, eg 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit

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 5%. (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, eg 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit

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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Question

N1.

LeBron James (LBJ) Corporation agrees on January 1, 2025, to lease equipment from Pharoah, Inc. for 3 years. The lease calls for
annual lease payments of $21,000 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 5%. (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, eg. 5,275, Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Date
Account Titles and Explanation
Debit
Credit

1/1/25
12/31/25
Lease Liability
Cash
(To record lease payment)
Lease Expense
List of Accounts
Lease Liability
Right-of-Use Asset
eTextbook and Medial
II
21000
21000
21000
DO
2310
18690

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