Sunset Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is four years, with no renewal option. Payments of $18,500 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $75,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $3,000. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. The lessee is aware that the lessor used an implicit rate of 3%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 2. Prepare the journal entries on Sunset's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021

Sunset Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement. The term of the noncancellable lease is four years, with no renewal option. Payments of $18,500 are due on January 1, of each year. The fair value of the equipment on January 1, 2020 is $75,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $3,000. The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor. The lessee is aware that the lessor used an implicit rate of 3%. (Present Value & Future Value Tables are provided on pages 3 and 4) Instructions: 2. Prepare the journal entries on Sunset's books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule) a. January 1, 2020 b. December 31, 2020 c. January 1, 2021

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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