Recording Finance Lease Journal Entries— Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement for a floor of a building on December 31 that requires annual payments of $28,000, beginning immediately. The residual value of $20,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual of $12,000 at the end of the lease term. Smith is aware of the lessor’s implicit rate of interest of 7%. Record Smith’s journal entries on December 31, assuming that the lease is properly classified as a finance lease. Note: Round your answers to the nearest whole dollar.
Recording Finance Lease Journal Entries— Guaranteed Residual Value Smith, the lessee, signs an 8-year lease agreement for a floor of a building on December 31 that requires annual payments of $28,000, beginning immediately. The residual value of $20,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual of $12,000 at the end of the lease term. Smith is aware of the lessor’s implicit rate of interest of 7%. Record Smith’s journal entries on December 31, assuming that the lease is properly classified as a finance lease. Note: Round your answers to the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Recording Finance Lease
Smith, the lessee, signs an 8-year lease agreement for a floor of a building on December 31 that requires annual payments of $28,000, beginning immediately. The residual value of $20,000 is guaranteed to the lessor at the end of the lease term. Smith estimates a residual of $12,000 at the end of the lease term. Smith is aware of the lessor’s implicit rate of interest of 7%. Record Smith’s journal entries on December 31, assuming that the lease is properly classified as a finance lease.
Note: Round your answers to the nearest whole dollar.
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