Sheridan Co. leased machinery from Young, Inc. on January 1, 2025. The lease term was for 8 years, with equal annual rental payments of $5,500 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 $2,500, 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 $39,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2025 journal entries. (List all debit entries before credit 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. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)
Sheridan Co. leased machinery from Young, Inc. on January 1, 2025. The lease term was for 8 years, with equal annual rental payments of $5,500 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 $2,500, 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 $39,000. The implicit rate of the lease is not known to Sheridan. Sheridan's incremental borrowing rate is 10%. Prepare Sheridan's 2025 journal entries. (List all debit entries before credit 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. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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