Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $33,300 at the beginning of each year. The first payment is received on January 1, 2025. Wildhorse had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. Assume that Blossom Corporation does not know the rate implicit in the lease used by Wildhorse, and Blossom's incremental borrowing rate is 9%. In addition, assume that Blossom incurs initial direct costs of $13,000. Click here to view factor tables. (a) Your answer is incorrect. Compute the amount of the lease liability and right-of-use asset for Blossom. (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.) Lease liability Right-of-use asset $ $
Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-year period and requires equal annual payments of $33,300 at the beginning of each year. The first payment is received on January 1, 2025. Wildhorse had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Wildhorse is probable. Wildhorse set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Wildhorse at the termination of the lease. Assume that Blossom Corporation does not know the rate implicit in the lease used by Wildhorse, and Blossom's incremental borrowing rate is 9%. In addition, assume that Blossom incurs initial direct costs of $13,000. Click here to view factor tables. (a) Your answer is incorrect. Compute the amount of the lease liability and right-of-use asset for Blossom. (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.) Lease liability Right-of-use asset $ $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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and please complete the accompanying journal entries :) thank you!!
Transcribed Image Text:Wildhorse Company, a machinery dealer, leased a machine to Blossom Corporation on January 1, 2025. The lease is for an 8-year
period and requires equal annual payments of $33,300 at the beginning of each year. The first payment is received on January 1, 2025.
Wildhorse had purchased the machine during 2024 for $150,000. Collectibility of lease payments by Wildhorse is probable.
Wildhorse set the annual rental to ensure a 7% rate of return. The machine has an economic life of 10 years with no residual value and
reverts to Wildhorse at the termination of the lease. Assume that Blossom Corporation does not know the rate implicit in the lease
used by Wildhorse, and Blossom's incremental borrowing rate is 9%. In addition, assume that Blossom incurs initial direct costs of
$13,000.
Click here to view factor tables.
(a)
Your answer is incorrect.
Compute the amount of the lease liability and right-of-use asset for Blossom. (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.)
Lease liability
Right-of-use asset
$
$
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