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Prepare the journal entries on Sam's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease years 2021, 2022 and the entry on Jan 1, 2023. dean's year end is December 31st.

Prepare the journal entries on Sam's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease years 2021, 2022 and the entry on Jan 1, 2023. dean's year end is December 31st.

FINANCIAL ACCOUNTING
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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On January 1, 2021 Sam's company signs a 10 year noncancelable lease agreement to lease a building from Kane storage company. Below are the facts of the lease agreement 1) The agreement requires equal rent payments of $47,000 beginning on Jan 1, 2021 2) The fair and present value of the building is $450,000 on Jan 1, 2021 3) The building has an estimated economic life of 12 years with unguaranteed residual value of $20,000. Sam depreciates using the straight-line method. I 4) The lease is nonrenewable and at the end the building is owned by the lessor. 5) Sam's incremental borrowing rate is 11 percent per year. Kane storage rate is unknown. 5) The yearly rental payment includes a $2,500 executory cost. Prepare the journal entries on Sam's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease years 2021, 2022 and the entry on Jan 1, 2023. dean's year end is December 31st.
Transcribed Image Text:On January 1, 2021 Sam's company signs a 10 year noncancelable lease agreement to lease a building from Kane storage company. Below are the facts of the lease agreement 1) The agreement requires equal rent payments of $47,000 beginning on Jan 1, 2021 2) The fair and present value of the building is $450,000 on Jan 1, 2021 3) The building has an estimated economic life of 12 years with unguaranteed residual value of $20,000. Sam depreciates using the straight-line method. I 4) The lease is nonrenewable and at the end the building is owned by the lessor. 5) Sam's incremental borrowing rate is 11 percent per year. Kane storage rate is unknown. 5) The yearly rental payment includes a $2,500 executory cost. Prepare the journal entries on Sam's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease years 2021, 2022 and the entry on Jan 1, 2023. dean's year end is December 31st.
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