Sunland Corporation (Sunland) manufactures equipment with an estimated economic life of 12 years. On May 30, 2023,
Fantastic news! We've Found the answer you've been seeking!
Question:
Sunland Corporation ("Sunland") manufactures equipment with an estimated economic life of 12 years. On May 30, 2023, Sunland leases it to Gadget Corporation ("Gadget") for a period of 10 years. Details of the lease are as follows:
Equipment has a fair value and cost at the inception of the lease: $269,243. | ||
Guaranteed residual value: $27,000. | ||
Annual lease payment, due at beginning of each year: $34,000. | ||
Lease contains no renewal options and the equipment reverts to Sunland at the end of the lease. | ||
Gadget's incremental interest rate, as well as implicit rate is 7%. | ||
Gadget uses straight-line depreciation for similar equipment that it owns. | ||
Sunland has determined that collectibility of lease payments is reasonably predictable and that no additional costs will be incurred. |
Assume both companies follow ASPE.
(b)
Prepare the journal entries for the lessee and lessor at May 30, 2023, the inception of the lease, and at December 31, 2023, which is the year end for both the lessee and lessor
Related Book For
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
Posted Date: