Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.) Rental payments $ SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Prepare the entries for Rauch for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit 1/1/2012/31/20 1/1/2012/31/20 (To record the recognition of the revenue) 1/1/2012/31/20 (To record depreciation expense on the leased equipment

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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Exercise 21-22 a-b

Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease payments with the intent of earning a 5% return, and Donahue is aware of this rate. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

Click here to view factor tables.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

What is the amount of the rental payments used in the lease agreement? (Round answer to 0 decimal places, e.g. 5,275.)

Rental payments

SHOW LIST OF ACCOUNTS

LINK TO TEXT

Prepare the entries for Rauch for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/20

1/1/2012/31/20

	(To record the recognition of the revenue)
1/1/2012/31/20

	(To record depreciation expense on the leased equipment)

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