Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2018. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2018; remaining payments at June 30 and December 31 each year through June 30, 2022. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2018: $20 million. Prepare the journal entries for both Technoid. inc and Lone Star company on Jan 1st, 2018, at the beginning of the lease.
Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2018. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment at January 1, 2018; remaining payments at June 30 and December 31 each year through June 30, 2022. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers at January 1, 2018: $20 million. Prepare the journal entries for both Technoid. inc and Lone Star company on Jan 1st, 2018, at the beginning of the lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Technoid Inc. sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2018.
The manufacturing cost of the computers was $12 million.
This noncancelable lease had the following terms:
Lease payments: $2,466,754 semiannually; first payment at January 1, 2018; remaining payments at June 30 and
December 31 each year through June 30, 2022.
Lease term: five years (10 semiannual payments).
No residual value; no purchase option.
Economic life of equipment: five years.
Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually.
Fair value of the computers at January 1, 2018: $20 million.
Prepare the journal entries for both Technoid. inc and Lone Star company on Jan 1st, 2018, at the
beginning of the lease.
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