Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $400,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $400,000. 4. Ten-Care agrees to pay all executory costs directly to a third party. 5. The lease contains no renewal or bargain purchase option. 6. The interest rate implicit in the lease is 12%. 7. The initial direct costs are insignificant and assumed to be zero. 8. It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Prepare journal entries for Rexon for the years 2019 and 2020
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows: 1. The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. 2. The cost of the equipment is $400,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. 3. The equipment has a fair value of $400,000. 4. Ten-Care agrees to pay all executory costs directly to a third party. 5. The lease contains no renewal or bargain purchase option. 6. The interest rate implicit in the lease is 12%. 7. The initial direct costs are insignificant and assumed to be zero. 8. It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Prepare journal entries for Rexon for the years 2019 and 2020
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter11: Notes, Bonds, And Leases
Section: Chapter Questions
Problem 9Q
Related questions
Question
Rexon Company leases non-specialized equipment to Ten-Care Company beginning January 1, 2019. The lease terms, provisions, and related events are as follows:
1. | The lease term is 8 years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. |
2. | The cost of the equipment is $400,000. The equipment has an estimated life of 8 years and has a zero estimated value at the end of that time. |
3. | The equipment has a fair value of $400,000. |
4. | Ten-Care agrees to pay all executory costs directly to a third party. |
5. | The lease contains no renewal or bargain purchase option. |
6. | The interest rate implicit in the lease is 12%. |
7. | The initial direct costs are insignificant and assumed to be zero. |
8. |
It is probable that Rexon will collect the lease payments plus any amount necessary to satisfy a residual value guarantee. Prepare |
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning