Smith, the lessee, signs an 8-year lease agreement of a floor of a building on December 31,
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Smith, the lessee, signs an 8-year lease agreement of a floor of a building on December 31, 2020, that requires annual payments of $70,000, beginning immediately. The residual value is guaranteed to the lessor of $50,000 at the end of the lease term. Smith estimates that the residual will have a value of $30,000 at the end of the lease term. Smith is aware of the lessor’s implicit rate of interest of 7%. Record Smith’s journal entries on December 31, 2020, assuming that the lease is properly classified as a finance lease.
- Round your answers to the nearest whole dollar.
Date | Account Name | Dr. | Cr. |
---|---|---|---|
Dec. 31, 2020 | AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense | Answer | Answer |
AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense | Answer | Answer | |
To record asset and liability | |||
Dec. 31, 2020 | AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense | Answer | Answer |
AnswerCashInitial Direct CostInventoryPrepaid Maintenance ExpenseEquipmentAccumulated DepreciationLease ReceivableRight-of-Use AssetAccrued Legal ExpenseDeferred Lease RevenueDeposit LiabilityLease Incentive PayableLease LiabilitySales RevenueInterest RevenueLease RevenueCost of Goods SoldAmortization ExpenseDepreciation ExpenseInterest ExpenseLease ExpenseLoss on LeaseSelling Expense | Answer | Answer | |
To record cash lease payment |
Related Book For
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson, Wayne Thomas
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