Windsorenters into an agreement with Traveler Inc. to lease a car on December 31, 2019. This is a finance lease. The following information relates to this agreement.

1.The term of the non-cancelable lease is3years with no renewal or bargain purchase option. The remaining economic life of the car is3years, and it is expected to have no residual value at the end of the lease term.

2.The fair value of the car was $12,300at commencement of the lease.

3.Annual payments are required to be made on December 31 at the end of each year of the lease, beginning December 31, 2020. The first payment is to be of an amount of $4,553.20, with each payment increasing by a constant 

rate of 5% from the previous payment (i.e., the second payment will be $4,780.86and the third and final payment will be $5,019.90).

 

4.Windsor' incremental borrowing rate is8%. The rate implicit in the lease is unknown.

5.Windsoruses straight-line depreciation for all similar cars.

(a) Prepare Windsor' journal entries for 2019, 2020, and 2021.

Answer rating: 100% (QA)

To prepare Windsors journal entries for 2019 2020 and 2021 we need to consider th... View the full answer