YK Incorporated leased road building equipment from Bajan Leasing on January 1, 2021. Bajan purchased the equipment from International Machines at a cost of $148,930. Related Information: Lease term 2 years (4 semi-annual periods) Quarterly rental payments $40,000 at the beginning of each period Economic life of asset 2 years Fair value of asset $148,930 Implicit interest rate 10% (Also lessee’s incremental borrowing rate) Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
YK Incorporated leased road building equipment from Bajan Leasing on January 1, 2021. Bajan purchased the equipment from International Machines at a cost of $148,930.
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Related Information: |
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Lease term |
2 years (4 semi-annual periods) |
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Quarterly rental payments |
$40,000 at the beginning of each period |
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Economic life of asset |
2 years |
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Fair value of asset |
$148,930 |
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Implicit interest rate |
10% |
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(Also lessee’s incremental borrowing rate) |
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Required:
Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
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