Skysong enters into an agreement with Traveler Inc. to lease a car on December 31, 2019. The following information relates to this agreement.1. The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term.2. The fair value of the car was $14,100 at commencement of the lease.3. Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2020. The first payment is to be of an amount of $5,148.50, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be $5,519.36 and the third and final payment will be $5,795.30).4. Skysong’ incremental borrowing rate is 8%. The rate implicit in the lease is unknown.5. Skysong uses straight-line depreciation for all similar cars.(a)Prepare Skysong’ journal entries for 2019, 2020, and 2021. (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 2 decimal places, e.g. 5,275.25. Record journal entries in the order presented in the problem.)Click here to view factor tables.DateAccount Titles and ExplanationDebitCreditchoose a transaction date enter an account titleenter a debit amountenter a credit amount enter an account titleenter a debit amountenter a credit amountchoose a transaction date enter an account title to record interest expenseenter a debit amountenter a credit amount enter an account title to record interest expenseenter a debit amountenter a credit amount enter an account title to record interest expenseenter a debit amountenter a credit amount (To record interest expense) choose a transaction date enter an account title to record amortization of the right-of-use assetenter a debit amountenter a credit amount enter an account title to record amortization of the right-of-use assetenter a debit amountenter a credit amount (To record amortization of the right-of-use asset) choose a transaction date enter an account title to record interest expenseenter a debit amountenter a credit amount enter an account title to record interest expenseenter a debit amountenter a credit amount enter an account title to record interest expenseenter a debit amountenter a credit amount (To record interest expense) choose a transaction date enter an account title to record amortization of the right-of-use assetenter a debit amountenter a credit amount enter an account title to record amortization of the right-of-use assetenter a debit amountenter a credit amount (To record amortization of the right-of-use asset)

Answered: Skysong enters into an agreement with…

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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Skysong enters into an agreement with Traveler Inc. to lease a car on December 31, 2019. The following information relates to this agreement.

1.		The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term.
2.		The fair value of the car was $14,100 at commencement of the lease.
3.		Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2020. The first payment is to be of an amount of $5,148.50, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be $5,519.36 and the third and final payment will be $5,795.30).
4.		Skysong’ incremental borrowing rate is 8%. The rate implicit in the lease is unknown.
5.		Skysong uses straight-line depreciation for all similar cars.

(a)

Prepare Skysong’ journal entries for 2019, 2020, and 2021. (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 2 decimal places, e.g. 5,275.25. Record journal entries in the order presented in the problem.)

Click here to view factor tables.

Date	Account Titles and Explanation	Debit	Credit
choose a transaction date

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

choose a transaction date

enter an account title to record interest expense

enter a debit amount

enter a credit amount

enter an account title to record interest expense

enter a debit amount

enter a credit amount

enter an account title to record interest expense

enter a debit amount

enter a credit amount

(To record interest expense)

choose a transaction date

enter an account title to record amortization of the right-of-use asset

enter a debit amount

enter a credit amount

enter an account title to record amortization of the right-of-use asset

enter a debit amount

enter a credit amount

(To record amortization of the right-of-use asset)

choose a transaction date

enter an account title to record interest expense

enter a debit amount

enter a credit amount

enter an account title to record interest expense

enter a debit amount

enter a credit amount

enter an account title to record interest expense

enter a debit amount

enter a credit amount

(To record interest expense)

choose a transaction date

enter an account title to record amortization of the right-of-use asset	enter a debit amount	enter a credit amount
enter an account title to record amortization of the right-of-use asset	enter a debit amount	enter a credit amount
(To record amortization of the right-of-use asset)

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