Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $113,273 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $400,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 9%. Click here to view factor tables. Prepare Sage Hill’s 2019 and 2020 journal entries, assuming Sage Hill depreciates similar equipment it owns on a straight-line basis.
Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $113,273 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $400,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 9%. Click here to view factor tables. Prepare Sage Hill’s 2019 and 2020 journal entries, assuming Sage Hill depreciates similar equipment it owns on a straight-line basis.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Sage Hill Company leased equipment from Costner Company, beginning on December 31, 2019. The lease term is 4 years and requires equal rental payments of $113,273 at the beginning of each year of the lease, starting on the commencement date (December 31, 2019). The equipment has a fair value at the commencement date of the lease of $400,000, an estimated useful life of 4 years, and no estimated residual value. The appropriate interest rate is 9%.
Click here to view factor tables.
Prepare Sage Hill’s 2019 and 2020
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
|---|---|---|---|---|
|
|
enter an account title To record lease liability on December 31 2019
|
enter a debit amount
|
enter a credit amount
|
|
|
|
enter an account title To record lease liability on December 31 2019
|
enter a debit amount
|
enter a credit amount
|
|
|
|
(To record lease liability)
|
|||
|
|
enter an account title To record lease payment on December 31 2016
|
enter a debit amount
|
enter a credit amount
|
|
|
|
enter an account title To record lease payment on December 31 2016
|
enter a debit amount
|
enter a credit amount
|
|
|
|
(To record lease payment)
|
|||
|
|
enter an account title To record interest expense on December 31 2020
|
enter a debit amount
|
enter a credit amount
|
|
|
|
enter an account title To record interest expense on December 31 2020
|
enter a debit amount
|
enter a credit amount
|
|
|
|
enter an account title To record interest expense on December 31 2020
|
enter a debit amount
|
enter a credit amount
|
|
|
|
(To record interest expense)
|
|||
|
|
enter an account title To record amortization of the right-of-use asset on December 31 2020
|
enter a debit amount
|
enter a credit amount
|
|
|
|
enter an account title To record amortization of the right-of-use asset on December 31 2020
|
enter a debit amount
|
enter a credit amount
|
|
|
|
(To record amortization of the right-of-use asset)
|
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