Vaughn Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $41,600 each, beginning December 31, 2019. In addition, Vaughn guarantees the lessor a residual value of $19,800 at the end of the lease. However, Vaughn believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 6 years.
Vaughn Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of $41,600 each, beginning December 31, 2019. In addition, Vaughn guarantees the lessor a residual value of $19,800 at the end of the lease. However, Vaughn believes it is probable that the expected residual value at the end of the lease term will be $9,900. The equipment has a useful life of 6 years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Vaughn Corporation enters into a 6-year lease of equipment on December 31, 2019, which requires 6 annual payments of
$41,600 each, beginning December 31, 2019. In addition, Vaughn guarantees the lessor a residual value of $19,800 at the end of the
lease. However, Vaughn believes it is probable that the expected residual value at the end of the lease term will be $9,900. The
equipment has a useful life of 6 years.
Prepare Vaughns' December 31, 2019, journal entries assuming the implicit rate of the lease is 10% and this is known to Vaughn.
(Credit account titles are automatically indented when 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 O decimal places e.g. 5,275.)
Click here to view factor tables.
Date
December 31,
2019
December 31,
2019
Account Titles and Explanation
Cash
Lease Receivable
(To record the lease liability)
(To record lease payment)
Debit
41,600
Credit
41,600
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