The following facts pertain to a non-cancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee:

	Commencement date	May 1, 2017
	Annual lease payment due at the beginning of each lease year, beginning May 1, 2017	$20,472
	Bargain purchase option price at end of lease term	$4,000
	Lease term	5 years
	Economic life of leased equipment	10 years
	Lessor's cost	$65,000
	Fair value of asset at May 1, 2017	$91,000
	Lessor's implicit rate (known to both parties)	8%
	Lessee's incremental borrowing rate	6%
	Lessor paid initial direct cost	$2,000
	Lessee paid initial direct cost	$2,000
	The conductibility of the lease payments by Mooney is probable.
	Both companies have a December 31, 2017 year end

 

 

 

Use the information in the above scenario to prepare the 2017 journal entries for the LESSEE.  

1) May 1, 2017 lease commencement

2) May 1, 2017 lease payment

3) December 31, 2017 year end accrual

4) December 31, 2017 year end amortization

 

Answer rating: 100% (QA)

Answer Since there is bargain purchase option and present value of payment is 90 of the fair v... View the full answer