Scape Corp. manufactures hi-tech equipment. Scape leased equipment to User, Inc., on January 1, 2019. Scape manufactured the equipment at a cost of $3,700,000. Lease description: Annual rental payments$1,000,000 at beginning of each period Lease term5 years No Bargain Purchase – Or special use at the end Implicit interest rate and lessee’s incremental borrowing rate12% Fair value of asset Expected Life of the Asset (SL depreciation with no salvage value)$6,000,0006 years Prepare appropriate entries for both User and Scape from the inception of the lease through the end of the first fiscal year (December 31).

Year PV factor @ 8% Remarks 0 1.00000 1 0.89286 = 1 / 1.12 2 0.79719 = 0.89286 /…

Answered: Scape Corp. manufactures hi-tech…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Scape Corp. manufactures hi-tech equipment. Scape leased equipment to User, Inc., on January 1, 2019. Scape manufactured the equipment at a cost of $3,700,000.

Lease description:
Annual rental payments	$1,000,000 at beginning of each period
Lease term	5 years
No Bargain Purchase – Or special use at the end
Implicit interest rate and lessee’s incremental borrowing rate	12%
Fair value of asset Expected Life of the Asset (SL depreciation with no salvage value)	$6,000,000 6 years
Prepare appropriate entries for both User and Scape from the inception of the lease through the end of the first fiscal year (December 31).

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