The classification of the lease for the lessee and the accounting treatment. Given information: Lease term is 4 years. Economic life of asset is 4 years. Machine is not specialized in nature. Fair value of the asset is $450,000. Interest rate is 10% Annual lease payments are $148,000 Lessee depreciates the asset on SLM basis. Standalone price for maintenance charge is $25,000.
The classification of the lease for the lessee and the accounting treatment. Given information: Lease term is 4 years. Economic life of asset is 4 years. Machine is not specialized in nature. Fair value of the asset is $450,000. Interest rate is 10% Annual lease payments are $148,000 Lessee depreciates the asset on SLM basis. Standalone price for maintenance charge is $25,000.
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
Chapter 18, Problem 18.6E
a.
To determine
The classification of the lease for the lessee and the accounting treatment.
Given information:
Lease term is 4 years.
Economic life of asset is 4 years.
Machine is not specialized in nature.
Fair value of the asset is $450,000.
Interest rate is 10%
Annual lease payments are $148,000
Lessee depreciates the asset on SLM basis.
Standalone price for maintenance charge is $25,000.
b.
To determine
To prepare: The amortization tables for the finance lease transactions.
Given information:
Lease term is 4 years.
Fair value of the asset is $450,000.
Interest rate is 10%
c.
To determine
To prepare: The journal entries for the lessee and supporting amortization tables to account for this agreement over the lease term.