Sunland Corporation agrees on January 1, 2025, to lease equipment from Carla Vista, Inc. for 3 years. The lease calls for annual lease payments of $20,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Carla Vista, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $178,000. Prepare Carla Vista' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation (To record the recognition of the revenue each period) Debit Credit

Sunland Corporation agrees on January 1, 2025, to lease equipment from Carla Vista, Inc. for 3 years. The lease calls for annual lease payments of $20,000 at the beginning of each year. The lease does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. In addition, the economic life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment. Assume that for Carla Vista, Inc., the lessor, the collectibility of the lease payments is probable, and the fair value and cost of the equipment is $178,000. Prepare Carla Vista' 2025 journal entries, assuming the company uses straight-line depreciation and no salvage value. (List all debit entries before credit entries. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation (To record the recognition of the revenue each period) Debit Credit

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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LeBron James (LBJ) Corporation agrees on January 1, 2020, to lease equipment from Cullumber, Inc. for 3 years. The lease calls for annual lease payments of $18,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a bargain purchase option, and is not a specialized asset. In addition, the useful life of the equipment is 10 years, and the present value of the lease payments is less than 90% of the fair value of the equipment.Prepare LBJ’s journal entries on January 1, 2020 (commencement of the operating lease), and on December 31, 2020. Assume the implicit rate used by the lessor is unknown, and LBJ’s incremental borrowing rate is 6%. (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 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.)Click…
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