Cullumber Corporation, which uses ASPE, leased equipment it had manufactured at a cost of $128,071 for Marigold,
Question:
Cullumber Corporation, which uses ASPE, leased equipment it had manufactured at a cost of $128,071 for Marigold, the lessee. The equipment's regular selling price is $163,000. The term of the lease is 5 years, beginning January 1, 2020, with equal rental payments of $37,153 at the beginning of each year. Marigold pays all executory costs directly to third parties. The equipment's fair value at the lease's inception is $163,000. The equipment has a useful life of seven years with no residual value. The lease has an implicit interest rate of 7%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Cullumber.
Prepare Cullumber Corporation's January 1, 2020 journal entries at the inception of the lease and the entry at December 31, 2020, to record interest.
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella