On September 30, 2019, Illini Auto Leasing leased a delivery truck to a Mama Del's Pizza....

 

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On September 30, 2019, Illini Auto Leasing leased a delivery truck to a Mama Del's Pizza. The lease agreement specified quarterly payments of $10,000 beginning September 30, 2019, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2023 (4-year lease term). Mama Del's had the option to purchase the truck on September 29, 2022, for $32,000 when it was expected to have a fair value of $42,000. The estimated useful life of the truck is 5 years. The lease's implicit quarterly interest rate is 2% (approximately 8% annually). Illini paid $120,000 for the truck in September 2019. A. This lease is classified as a finance lease. Why? One reason is sufficient. B. Record the appropriate journal entries that Illini (the lessor) records on September 30, 2019. C. Record the appropriate journal entries that Mama Del's (the lessee) records on September 30, 2019. D. Record the appropriate journal entries that Illini (the lessor) records on December 31, 2019. E. Record the appropriate journal entries that Mama Del's (the lessee) records on December 31, 2019. On September 30, 2019, Illini Auto Leasing leased a delivery truck to a Mama Del's Pizza. The lease agreement specified quarterly payments of $10,000 beginning September 30, 2019, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2023 (4-year lease term). Mama Del's had the option to purchase the truck on September 29, 2022, for $32,000 when it was expected to have a fair value of $42,000. The estimated useful life of the truck is 5 years. The lease's implicit quarterly interest rate is 2% (approximately 8% annually). Illini paid $120,000 for the truck in September 2019. A. This lease is classified as a finance lease. Why? One reason is sufficient. B. Record the appropriate journal entries that Illini (the lessor) records on September 30, 2019. C. Record the appropriate journal entries that Mama Del's (the lessee) records on September 30, 2019. D. Record the appropriate journal entries that Illini (the lessor) records on December 31, 2019. E. Record the appropriate journal entries that Mama Del's (the lessee) records on December 31, 2019.