ssume that IBM leased equipment that was carried at a cost of $118,000 to Wildhorse Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $30,044 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $129,554. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable. Prepare IBM’s December 31, 2019, journal entries at commencement of the lease. (Credit account titles are automatically indented when 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 0 decimal places e.g. 5,275.) Click here to view factor tables. Date Account Titles and Explanation Debit Credit December 31, 2019 enter an account title To record the lease enter a debit amount enter a credit amount enter an account title To record the lease enter a debit amount enter a credit amount enter an account title To record the lease enter a debit amount enter a credit amount enter an account title To record the lease enter a debit amount enter a credit amount (To record the lease) December 31, 2019 enter an account title To record receipt of lease payment enter a debit amount enter a credit amount enter an account title To record receipt of lease payment enter a debit amount enter a

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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Assume that IBM leased equipment that was carried at a cost of $118,000 to Wildhorse Company. The term of the lease is 5 years December 31, 2019, with equal rental payments of $30,044 beginning December 31, 2019. The fair value of the equipment at commencement of the lease is $129,554. The equipment has a useful life of 5 years with no salvage value. The lease has an implicit interest rate of 8%, no bargain purchase option, and no transfer of title. Collectibility of lease payments for IBM is probable.

Prepare IBM’s December 31, 2019, journal entries at commencement of the lease. (Credit account titles are automatically indented when 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 0 decimal places e.g. 5,275.)

Click here to view factor tables.

Date	Account Titles and Explanation	Debit	Credit
December 31, 2019	enter an account title To record the lease	enter a debit amount	enter a credit amount
	enter an account title To record the lease	enter a debit amount	enter a credit amount
	enter an account title To record the lease	enter a debit amount	enter a credit amount
	enter an account title To record the lease	enter a debit amount	enter a credit amount
	(To record the lease)
December 31, 2019	enter an account title To record receipt of lease payment	enter a debit amount	enter a credit amount
	enter an account title To record receipt of lease payment	enter a debit amount	enter a credit amount
	(To record receipt of lease payment)

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