intermediate 2

Project Description:

on january, 1, 2013, cage company contracts to lease equipment for 5 years, agreeing to make a payment of $137,899 (including executory costs of $6,000) at the beginning of each year, staring january 1, 2013.the taxes, insurance, and the maintenance, estimated at $6,000 per year, are the obligations of the lessee. the leased equipment is to be capitalized at $550,000. the asset is to be depreciated on a double-declining basis, and the obligation is to be reduced on an effective-interest basis. cage's incremental borrowing rate is 12% and the implicit rate in the lease is 10%, which is known by cage. title to the equipment transfers to cage when the lease expires. the asset has an estimated useful life of 5 years and no residual value.
required:

1. explain the probable relationship of the $550,000 amount to the lease arrangement.
2. prepare the journal entry or entries that should be recorded on january 1, 2013.
3. prepare the journal entry to record depreciation of the leased asset for the year 2013.
4. prepare the journal entry to record the interest expense for the year 2013.
5. prepare the journal entry to record the lease payment of january 1, 2014, assuming reversing entries are not made.
6. what amounts will appear on the lessee's december 31, 2013, assuming reversing entries contract?
Skills Required:
Project Stats:

Price Type: Negotiable

Expired
Total Proposals: 5
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