Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Sheffield Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased.
Prepare Sheffield’sjournal entries on January 1, 2020, and December 31, 2020. Assume the annual lease payment is $44,000 at the beginning of each year, and Sheffield’s incremental borrowing rate is 9%, which is the same as the lessor’s implicit rate. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)
Click here to view factor tables.
Prepare Sheffield’s
Click here to view factor tables.
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Account Titles and Explanation
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Debit
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Credit
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| (To record lease liability) | |||
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| (To record lease payment) | |||
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