Reporting Finance Lease, Guaranteed Residual— Lessee Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $50,000, and the property reverts to Mac at the end of the lease term. Lease payments of $11,923 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $10,000. The lease contains no purchase option. -- Note: Round your answer to the nearest whole dollar. A. What is the lease liability balance on January 1, the lease commencement date? B. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. (attached in the first picture) C. Assume that Ash Corporation expects the residual value at the end of the lease term to be $3,500. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. (attached in the second picture)
Reporting Finance Lease, Guaranteed Residual— Lessee
Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1 of Year 1. The underlying asset has an estimated life of six years and a fair value of $50,000, and the property reverts to Mac at the end of the lease term. Lease payments of $11,923 are payable on January 1 of each year beginning at the lease commencement and are set to yield Mac a return of 8%, which is known to Ash. The estimated residual value at the end of the lease term is $10,000 and is guaranteed by Ash Corporation. Ash expects the residual value at the end of the lease term to be $10,000. The lease contains no purchase option. -- Note: Round your answer to the nearest whole dollar.
A. What is the lease liability balance on January 1, the lease commencement date?
B. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. (attached in the first picture)
C. Assume that Ash Corporation expects the residual value at the end of the lease term to be $3,500. Prepare the entries for Ash Corporation on January 1 and December 31 of Year 1. (attached in the second picture)
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What is the lease liability balance on January 1, the lease commencement date?
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