The lease agreement and related facts indicate the following: a. Leased equipment had a retail cash selling price of $300,000. Its useful life was five years with no residual value. b. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. c. The lease term is five years and the lessor paid $265,000 to acquire the equipment (sales-type lease). d. Lessor’s implicit rate when calculating annual lease payments was 8%. e. Annual lease payments beginning January 1, 2016, the inception of the lease, were $69,571. f. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $7,500. Required: Prepare the appropriate entries for the lessor to record: 1. The lease and the initial payment at its inception. 2. Any entry(s) necessary at December 31, 2016, the fiscal year-end.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

The lease agreement and related facts indicate the following: a. Leased equipment had a retail cash selling price of $300,000. Its useful life was five years with no residual value. b. Collectibility of the lease payments by the lessor was reasonably predictable and there were no costs to the lessor that were yet to be incurred. c. The lease term is five years and the lessor paid $265,000 to acquire the equipment (sales-type lease). d. Lessor’s implicit rate when calculating annual lease payments was 8%. e. Annual lease payments beginning January 1, 2016, the inception of the lease, were $69,571. f. Costs of negotiating and consummating the completed lease transaction incurred by the lessor were $7,500. Required: Prepare the appropriate entries for the lessor to record: 1. The lease and the initial payment at its inception. 2. Any entry(s) necessary at December 31, 2016, the fiscal year-end.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 5 images

Blurred answer
Knowledge Booster
Lease accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education