Swifty Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $44,000 at the beginning of each year, and Swifty’s incremental borrowing rate is 5%, which is the same as the lessor’s implicit rate. Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $304,000.
Swifty Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $44,000 at the beginning of each year, and Swifty’s incremental borrowing rate is 5%, which is the same as the lessor’s implicit rate. Prepare all the necessary journal entries for Falls Company (the lessor) for 2020, assuming the equipment is carried at a cost of $304,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Swifty Corporation leases equipment from Falls Company on January 1, 2020. The lease agreement does not transfer ownership, contain a bargain purchase option, and is not a specialized asset. It covers 3 years of the equipment’s 8-year useful life, and the present value of the lease payments is less than 90% of the fair value of the asset leased. The annual lease payment is $44,000 at the beginning of each year, and Swifty’s incremental borrowing rate is 5%, which is the same as the lessor’s implicit rate.
Prepare all the necessary
Transcribed Image Text:Date
Account Titles and Explanation
Debit
Credit
(To record the recognition of the revenue each period)
(To record depreciation expense on the leased equipment)
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