Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment, due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Assume both companies follow ASPE. prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023, which is the year and for both the lessee and the Lessor
Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment, due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. Assume both companies follow ASPE. prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023, which is the year and for both the lessee and the Lessor
Chapter1: Financial Statements And Business Decisions
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![Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023,
Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment
has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment,
due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end
of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line
depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably
predictable and that no additional costs will be incurred. Assume both companies follow ASPE.
prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023,
which is the year and for both the lessee and the Lessor
Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill
leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows:
•
•
●
●
.
.
.
(b)
c
Equipment has a fair value and cost at the inception of the lease: $199,573,
Guaranteed residual value: $23,000.
Assume both companies follow ASPE.
Annual lease payment, due at beginning of each year: $25,000.
Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease.
Gadget's incremental interest rate, as well as implicit rate is 7%.
Gadget uses straight-line depreciation for similar equipment that it owns.
Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be
incurred.
Prepare the journal entries for the
4](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4372ec4d-b133-43db-9782-a231351f841b%2F15179590-e67b-4389-848d-0af88d6358f6%2Fozqkk9p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023,
Sandhill leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows: Equipment
has a fair value and cost at the inception of the lease: $199,573. Guaranteed residual value: $23,000. Annual lease payment,
due at beginning of each year: $25,000. Lease contains no renewal options and the equipment reverts to Sandhill at the end
of the lease. Gadge Gadget's incremental interest rate, as well as implicit rate is 7%. ws Gadget uses straight-line
depreciation for similar equipment that it owns. Sandhill has determined that collectibility of lease payments is reasonably
predictable and that no additional costs will be incurred. Assume both companies follow ASPE.
prepare journal entries for the lessee and the lessor at May 30, 2023. The inception of the lease, and at December 31, 2023,
which is the year and for both the lessee and the Lessor
Sandhill Corporation ("Sandhill") manufactures equipment with an estimated economic life of 14 years. On May 30, 2023, Sandhill
leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows:
•
•
●
●
.
.
.
(b)
c
Equipment has a fair value and cost at the inception of the lease: $199,573,
Guaranteed residual value: $23,000.
Assume both companies follow ASPE.
Annual lease payment, due at beginning of each year: $25,000.
Lease contains no renewal options and the equipment reverts to Sandhill at the end of the lease.
Gadget's incremental interest rate, as well as implicit rate is 7%.
Gadget uses straight-line depreciation for similar equipment that it owns.
Sandhill has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be
incurred.
Prepare the journal entries for the
4
![Pessor at May 30, 2023, the inception of the lease, and at December 31, 2023, which
is the year end for both the lessee and lessor. (List all debit entries before credit entries. Credit account titles are automatically indented
when the amount is entered. Do not indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No
entry for the account titles and enter 0 for the amounts)
4
Lessee:
Date
Account Titles and Explanation
Date
(To record lease payment)
(To record interest)
(To record depreciation expense)
Show Transcribed Text
Account Titles and Explanation
(To record inception of lease)
(To record collection of lease payment)
(To record interest)
Ċ
Debit
Debit
Credit
Credit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4372ec4d-b133-43db-9782-a231351f841b%2F15179590-e67b-4389-848d-0af88d6358f6%2Fpi562k5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Pessor at May 30, 2023, the inception of the lease, and at December 31, 2023, which
is the year end for both the lessee and lessor. (List all debit entries before credit entries. Credit account titles are automatically indented
when the amount is entered. Do not indent manually. Round answers to 0 decimal places, eg. 5,275. If no entry is required, select "No
entry for the account titles and enter 0 for the amounts)
4
Lessee:
Date
Account Titles and Explanation
Date
(To record lease payment)
(To record interest)
(To record depreciation expense)
Show Transcribed Text
Account Titles and Explanation
(To record inception of lease)
(To record collection of lease payment)
(To record interest)
Ċ
Debit
Debit
Credit
Credit
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