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Sheridan Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,900 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the ease term for $2,000, which Sheridan is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $44,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, g. 5,275. Record journal entries in the order presented in the problem.) lick here to view factor tables

Sheridan Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,900 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the ease term for $2,000, which Sheridan is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $44,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, g. 5,275. Record journal entries in the order presented in the problem.) lick here to view factor tables

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Sheridan Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,900 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,000, which Sheridan is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $44,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/20 1/1/20 12/31/20 12/31/20 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Interest Expense Lease Liability (To record interest expense) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Debit 34747.87 5900 3474.79 4093.48 Credit 34747.87 5900 3474.79 4093.48
Transcribed Image Text:Sheridan Co. leased machinery from Young, Inc. on January 1, 2020. The lease term was for 8 years, with equal annual rental payments of $5,900 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,000, which Sheridan is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $5,000. The machinery has a useful life of 10 years and a fair value of $44,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2020 journal entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Click here to view factor tables. Date 1/1/20 1/1/20 12/31/20 12/31/20 Account Titles and Explanation Right-of-Use Asset Lease Liability (To record lease liability) Lease Liability Cash (To record lease payment) Interest Expense Lease Liability (To record interest expense) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Debit 34747.87 5900 3474.79 4093.48 Credit 34747.87 5900 3474.79 4093.48
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