On January 1, 2024, Ricks Pawn Shop leased a truck from Corey Motors for a six-year period
Question:
On January 1, 2024, Rick’s Pawn Shop leased a truck from Corey Motors for a six-year period with an option to extend the lease for three years. Rick’s had no significant economic incentive as of the beginning of the lease to exercise the three-year extension option. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% interest rate. The agreement is considered an operating lease.
Required:
1. Prepare Rick’s journal entry to record for the right-of-use asset and lease liability on January 1, 2024.
2. Prepare the journal entries to record interest and amortization on December 31, 2024.
Step by Step Answer:
The lease term will be 6 years The lease term is the contractual lease term modified by any renewal ...View the full answer
Related Video
A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
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