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Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is non-cancellable and has a term of 6 years. The annual rentals are $46,550, payable at the beginning of each year. The rental fee includes $550 for a service contract provided by Tyrell. Scuppermong Farms guarantees a residual value of $25,000 although Tyrell expects it to have a residual value of $32,269 at the end of 6 years. The interest rate implicit in the lease is 8%, which is known by Scuppermong. Scuppermong Farms' incremental borrowing rate is 9% and it uses the straight-line method to record depreciation on similar equipment. The fair value of the cultivator to Tyrell is $250,000 and its cost is $200,000. It has an economic life of 8 years. In addition, Tyrell paid $3,000 in commissions to the broker who arranged the deal. The equipment is not of a specialized nature. The title remains with Tyrrell Equipment and there is no bargain purchase option. Round all answers to the nearest dollar.

Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is non-cancellable and has a term of 6 years. The annual rentals are $46,550, payable at the beginning of each year. The rental fee includes $550 for a service contract provided by Tyrell. Scuppermong Farms guarantees a residual value of $25,000 although Tyrell expects it to have a residual value of $32,269 at the end of 6 years. The interest rate implicit in the lease is 8%, which is known by Scuppermong. Scuppermong Farms' incremental borrowing rate is 9% and it uses the straight-line method to record depreciation on similar equipment. The fair value of the cultivator to Tyrell is $250,000 and its cost is $200,000. It has an economic life of 8 years. In addition, Tyrell paid $3,000 in commissions to the broker who arranged the deal. The equipment is not of a specialized nature. The title remains with Tyrrell Equipment and there is no bargain purchase option. Round all answers to the nearest dollar.

FINANCIAL ACCOUNTING
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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Prepare all the journal entries for Scuppermong for Years 1 and 2.

Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is non-cancellable and has a term of 6 years. The annual rentals are $46,550, payable at the beginning of each year. The rental fee includes $550 for a service contract provided by Tyrell. Scuppermong Farms guarantees a residual value of $25,000 although Tyrell expects it to have a residual value of $32,269 at the end of 6 years. The interest rate implicit in the lease is 8%, which is known by Scuppermong. Scuppermong Farms' incremental borrowing rate is 9% and it uses the straight-line method to record depreciation on similar equipment. The fair value of the cultivator to Tyrell is $250,000 and its cost is $200,000. It has an economic life of 8 years. In addition, Tyrell paid $3,000 in commissions to the broker who arranged the deal. The equipment is not of a specialized nature. The title remains with Tyrrell Equipment and there is no bargain purchase option. Round all answers to the nearest dollar.
Transcribed Image Text:Scuppermong Farms signed an agreement on January 1, Year 1 to lease a cultivator from Tyrrell Equipment. The lease terms, provisions, and other related events are as follows: The lease is non-cancellable and has a term of 6 years. The annual rentals are $46,550, payable at the beginning of each year. The rental fee includes $550 for a service contract provided by Tyrell. Scuppermong Farms guarantees a residual value of $25,000 although Tyrell expects it to have a residual value of $32,269 at the end of 6 years. The interest rate implicit in the lease is 8%, which is known by Scuppermong. Scuppermong Farms' incremental borrowing rate is 9% and it uses the straight-line method to record depreciation on similar equipment. The fair value of the cultivator to Tyrell is $250,000 and its cost is $200,000. It has an economic life of 8 years. In addition, Tyrell paid $3,000 in commissions to the broker who arranged the deal. The equipment is not of a specialized nature. The title remains with Tyrrell Equipment and there is no bargain purchase option. Round all answers to the nearest dollar.
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